Multi-level marketing company Herbalife Ltd. (NYSE:HLF) is experiencing a severe amount of turbulence this morning. The company’s shares were down more than 3% on this morning’s market, trading below $60. The firm’s shares managed to stay above that figure for all of August. At time of writing shares in the company were selling for $59.19.
Today’s fall in value appears to be related to a Wall Street Journal article published last Friday that once again brought focus to the respected academic that Bill Ackman is using to back many of his arguments about the company.
Herbalife Ltd (NYSE:HLF) shares were some of the most talked about on the market in the first half of this year. The company’s stock has risen by more than 80% since January 1, despite the attentions of Bill Ackman, one of the world’s most famous investors. Herbalife has cost Ackman a lot of money so far this year, and it’s continuing to do so despite this morning’s downturn.
Shorting Herbalife
Bill Ackman predicted in a presentation last year that shares in Herbalife Ltd. (NYSE:HLF) would be worth nothing by the time he was finished with the company. Ackman doesn’t want other investors to look at the company’s accounts and decide it’s overvalued. Ackman is looking for the Federal Trade Commission to rule that Herbalife Ltd (NYSE:HLF)’s business is illegal.
This morning’s change in stock price means little to Ackman on that front. His bet necessitates a fall of far more than the 3% on this morning’s market. Ackman is not the only hedge fund manager involved in the Herbalife fight—big investors have lined up on both sides of the company’s shares. the most recent shots have been fired in a dispute between Ackman and George Soros.
FTC going after Herbalife
Nobody is sure what the chances of the FTC going after Herbalife really are, but Bill Ackman reckons the probability has been improving in recent months. In his most recent shareholder letter, Ackman wrote happily about the calls to investigate the company coming from prominent politicians and members of the public.
It’s impossible to make a good guess about the intentions of the Federal Trade Commision, but if political pressure does mount on the consumer protection agency it may be pushed to take a look at Herbalife Ltd. (NYSE:HLF). Ackman’s short is not going to gain from today’s losses, or will he benefit if the losses continue for days on end.
Bill Ackman wants Herbalife Ltd. (NYSE:HLF) gone, but it’s not an easy bet. This morning’s movements suggest that investors aren’t willing to bet on the company at prices over $60 any more.
