Shares of Herbalife Ltd. (NYSE:HLF) tanked suddenly right after CNBC revealed that noted hedge fund manager Bill Ackman shorted the company. He called the company a “pyramid scheme” and months ago (before revealing his short’s name) said “the country will be better off when the company goes bust.”
Herbalife Ltd. (NYSE:HLF) shares were halted briefly after a sudden double-digit drop on the news of a short from Bill Ackman, the founder of Pershing Square Capital Management. Ackman sent a letter to ValueWalk mentioning a rare short earlier this year but not naming the company he shorted. In Ackman’s letter, he said he had “a Patriotic short bet” and that “the country will be better off when the company goes bust.” Today we learn that that short was Herbalife Ltd. (NYSE:HLF).
Ackman was expected to release his short thesis on Herbalife tomorrow, but as soon as was leaked today on a CNBC report, shares of Herbalife Ltd. (NYSE:HLF) dropped as much as 13 percent before flattening out. A CNBC anchor said a source revealed that Ackman shorted the nutrition company, and he considered it the best short thesis he’s “ever seen.” The sudden double-digit drop after Ackman’s short was released caused trading on the stock to halt briefly.
Ackman reportedly has been researching Herbalife for about a year, and CNBC reported that he believes the company is a “pyramid scheme.” We should learn more at tomorrow’s press conference when Ackman will release his entire short thesis. Ackman is known typically for being a long-only investor, so the fact that he has a short is likely what made investors turn their heads and drop their shares.
Herbalife has had problems this year already thanks to another hedge fund manager—David Einhorn. As ValueWalk reported in May, Einhorn showed up at a press conference about the nutrition company. Einhorn’s questions at that press conference centered around the company’s accounting and reporting practices.