As expected and repeatedly predicted, Dan Loeb sliced his stake in Herbalife Ltd. (NYSE:HLF), CNBC reported a couple of days ago. There is no information as to how much Loeb sold and what is still left, however the selling was executed in the last few weeks.
This does not come as a surprise at all, although we are a little shaken by the synchronized movements of Dan Loeb’s Third Point and Robert Chapman’s Chapman Capital. Remember Bob Chapman spoke on Bloomberg that he had exited his position in Herbalife Ltd. (NYSE:HLF) entirely, right after Carl Icahn revealed his monster bet and within the same day sources told CNBC that Dan Loeb has been selling the stock that he talked about with a lot of conviction in his Q4 investor letter.
It seems the 5 percent that Third Point Offshore Fund gained in January alone could be attributed, in part, to Loeb pocketing big profits from Herbalife trade.
Loeb owned 8.9 million shares of the vitamin shakes company as of Jan. 3 2013, according to the 13G filed on Jan 9. The 13F for Q4, Loeb’s Third Point mentioned a stake of 3.1 million shares of Herbalife as of Dec. 31 2012. So Third Point bought 5.8 million shares in the three days of January when the stock traded in the range of $32. However, the shares bought in December must have given more edge to the fund as Bill Ackman’s presentation at Ira Sohn Conference and the preceding spoiler that he gave to CNBC plummeted Herbalife Ltd. (NYSE:HLF) in trading, where it fell as low as $26.
As Loeb himself said that the chunk of the 8.9 million stake was acquired in the period of panicked selling that ensued Bill Ackman’s disclosure, we are guessing that the pre-2013 HLF shares were acquired at an average price of $28. In January Herbalife has touched highs of $44, even if Loeb sold half of his holding, bought at an average price of $32 and sold at an average price of $44, he made around $50 million in profits.
If he sold in post market trading right after Icahn filed his 13D when Herbalife Ltd. (NYSE:HLF) was up to $49, these profits could be much higher.
In Third Point’s Q4 investor letter, Loeb said that the company is worth $55-$68 per share which gives significant upside to holding it as a long position. If Loeb was selling in the past few weeks, we bet he has continued selling because the return is even better now than it was before.
Moreover Herbalife is very jumpy, it can very well slide once again in the coming weeks when Ackman finds something new to present. There will be another window to buy at that time and Loeb could build a stake once again, provided he really believes that Herbalife is classic compounder.