After Bill Ackman used some very confusing terms to describe his former relationship with David Einhorn, one is left wondering if this Herbalife Ltd. (NYSE:HLF) drama will ever be short on craziness.
First, there is Ackman who is resolute on his stance that Herbalife is doomed; second there is Rob Chapman who is hurling insults at Ackman and making quick profits on his long Herbalife Ltd. (NYSE:HLF) trades; then we have Chapman’s pal, Dan Loeb whose conviction in Herbalife stands as long as the profits keep rolling and finally there is Carl Icahn who has taken it on himself to teach Ackman some kind of lesson, once and for all.
Between all this hatred for Ackman, the only voice of support has come from Jim Chanos (you have disappointed us David Boyfriend Einhorn) who said that he is bearish on Mutli Level Marketing as a business structure and would not invest in Herbalife for that reason. He today confirmed that he is indeed on Team Ackman,
Top value fund managers are ready for the small cap bear market to be done
During the bull market, small caps haven't been performing well, but some believe that could be about to change. Breach Inlet Founder and Portfolio Manager Chris Colvin and Gradient Investments President Michael Binger both expect small caps to take off. Q1 2020 hedge fund letters, conferences and more However, not everyone is convinced. BTIG strategist Read More
I think Bill Ackman is correct in his analysis, and that when your business is based, in effect, on selling an overpriced commodity to your customers, or your distributors, you ultimately have a flawed business down the road.
Chanos added that he exited the position in November of last year and no longer has a short. He added further that Herbalife is selling a bad product which is probably good at doing nothing for the consumer. Chanos also discussed his bearish position in Dell Inc. (NASDAQ:DELL).
On the Icahn front the latest is that he has suited up his long stake in Herbalife Ltd. (NYSE:HLF) even further. He now has permission to take up his holding in the company to 25 percent and also the liberty to nominate two people to the Board of Directors. His active stake in the company is now 13.6 percent, up from the nearly 13 percent reported in February. According to Icahn there are no present plans to expand his position even further, he could be waiting for Ackman to release some new critique on Herbalife and benefit from the consequent selling frenzy.
Michelle Celarier from NYPost reports that Dan Loeb has made a $50 million profit on Herbalife trade and speculates that Loeb has exited the position. At the same time Vanity Fair reports that Loeb started selling into the new year and sold some more after Icahn revealed his long position initially, just like we predicted earlier.
We suspect both Loeb and Robert Chapman will re-enter Herbalife at some point further, based on two reasons, this is one quick way of making profits and Ackman vs Icahn is not dying down anytime soon. The second more obvious reason is that owning Herbalife is the best way of saying “we hate you Bill” on Wall Street (and both Chapman and Loeb want to shout it out really loud) , so this is like ‘strawberry’ on top of ice cream as Icahn likes to put it.
While Icahn said in his CNBC interview that he did not make investments based on personal likes and emotions and insisted that his buying pattern in Herbalife did not seem like revenge on his sour history with Ackman, nobody is convinced even in the slightest. On the contrary Icahn buying pattern is exactly what reeks strongly of mixed motives.
Meanwhile we are seriously thinking over the possibility that Herbalife Ltd. (NYSE:HLF) actually makes people crazy because it sure has some interesting side effects on investors. Icahn thinks dietary supplements are a great business and has achieved new levels of weirdness in interviews; Ackman has become heroically confident and freakishly open about his feelings and Einhorn refuses to talk about Ackman but showers praise on Dan Loeb.
When you add Icahn’s long view on Dell and Chanos’ short in Dell in the mix, this is one hedge fund circus. We dream about Ackman saying that he is going short on Dell (not happening unless he loses his mind) while we wait for more insane stuff on Herbalife.
H/T Julia La Roche