Icahn Enterprises (IEP.O), led by billionaire activist investor Carl Icahn, announced on Friday that it has made a proposal to increase its stake in Texas-based refiner CVR Energy (CVI.N) to 81.3%, according to the several media reports. The investment company, which currently holds around 66.3% of CVR Energy, plans to purchase an additional 15 million shares of the refining firm at $17.50 per share. This proposed price offers nearly a 6% premium over CVR’s closing price on Thursday. Following the announcement, CVR Energy’s stock surged by more than 10%, reaching $18.03 during morning trading.

In a statement, Icahn Enterprises expressed its belief that CVR’s shares are undervalued in the market, presenting an attractive investment opportunity. CVR Energy operates two refineries: the Coffeyville facility in Kansas, with a capacity of 115,000 barrels per day, and the Wynnewood refinery in Oklahoma, with a capacity of 75,000 barrels per day. Icahn Enterprises’ move to increase its stake is seen as a strategic decision to further strengthen its influence over the refiner, which operates in a critical sector of the energy industry.

However, the proposed offer has raised concerns among some investors. Several media reports suggests that the 6% premium does not provide significant upside potential for shareholders. The proposal could also potentially worsen the liquidity of CVR’s stock, which is already considered illiquid. Investors worry that CVR’s shares are high-risk and could be difficult to sell without incurring a substantial loss in value, making the investment less appealing.

Following the announcement, shares of Icahn Enterprises dropped nearly 7% in morning trading, reflecting investor caution regarding the impact of this proposed deal. The decline in Icahn Enterprises’ stock price suggests that some investors are skeptical about the potential risks and rewards of the increased stake in CVR Energy.

In addition to the proposal, Icahn Enterprises revealed that it would be reducing its dividend by half, from $1.00 to $0.50 per share. This move is aimed at freeing up capital to fund the proposed CVR Energy acquisition, as well as to support other potential investment opportunities. The dividend cut signals that Icahn Enterprises is prioritizing strategic investments over shareholder payouts in the short term.

Overall, Icahn Enterprises’ proposal to boost its stake in CVR Energy has generated mixed reactions, with some viewing it as a smart move to capitalize on an undervalued asset, while others are concerned about the liquidity risks and the potential impact on Icahn Enterprises’ stock price.