Billionaire hedge-fund activist Carl Icahn has marched into the battle between Herbalife and Bill Ackman
According to Michelle Celarier of the New York Post, Carl Icahn may have initiated a long position in Herbalife. The news about Carl Icahn has just been confirmed by ValueWalk, although the size of the stake is unknown currently. Icahn joins Dan Loeb going long a stock which Bill Ackman is short.
Loeb’s dislike of Ackman goes back to 2008, when an investment went sour. Since then the two have had a love-hate relationship on Wall Street.
The news of Third Point’s investment, revealed in a regulatory filing, came just a day before Herbalife Ltd. (NYSE:HLF)’s much-anticipated investor meeting this morning at the Midtown Four Seasons Hotel.
The meeting, which is expected to last two or three hours, will likely feature Herbalife Ltd. (NYSE:HLF) boss, Michael Johnson, leading a no-holds-barred rebuttal to Ackman’s December 20 Herbalife takedown.
Ackman called the 32-year-old company out, calling it a pyramid scheme and saying that Herbalife does not offer a good value proposition to distributors, causing them to dry up and Herbalife to constantly need to find new ones. Secondly, Ackman claimed that regulators should shut the company down on legal grounds.
Ackman was so convinced that Herbalife Ltd. (NYSE:HLF)’s stock would fall to zero, that he posted a $1bn short position on the company.
Herbalife’s stock plummeted by 40 percent as a result of Ackman’s attack – but has since recovered somewhat, though it is still down 16 percent from a month ago.
Ackman was said to be scratching his head in disbelief once new life was breathed into the company’s stocks after Christmas. At the time, he didn’t know that Loeb was making a $270m bet against his $1bn wager.
Loeb, writing to his investors, called Ackman’s accusations “preposterous.”
Ackman, who’s Pershing Square Capital Management has shorted the 20 million shares in the wager, said he welcomed the “additional sunlight” from Loeb.
This isn’t the first time Ackman has got on the wrong side of fellow activist investors. Ackman and Carl Icahn are not on the best of terms, either, due to a legal battle Ackman won in 2011 after a real-estate deal between the two of them went bad.
Icahn is also believed to have taken a long position in Herbalife Ltd. (NYSE:HLF), according to sources, which has now been confirmed (as stated above).
Comparing the investment records of Loeb’s to Ackman’s – Loeb seems to come out on top; especially so because Ackman’s first fund, Gotham Partners, went under.
Last year, Pershing Square ended up by 12.4 percent – but almost half the gain came in December after news of his Herbalife short took off.
In a day of frenzied trading, Loeb’s stake in Herbalife became apparent and the company’s stock jumped. However, at 3pm., a report that the SEC was opening an inquiry into Herbalife Ltd. (NYSE:HLF) caused a seven-minute free-fall of the stock.
Herbalife’s stock is up 2.10 percent today, to $40.79. It is now higher than when Ackman made his attack against the company and predicted it to drop to zero.