What’s going on with Herbalife Ltd. (NYSE:HLF) shares today? They hit a new 52-week high, and on CNBC’s “Squawk on the Street” (via The Street), Jim Cramer said there’s “definitely a short squeeze taking place.” He advised investors to have an understanding of what they’re buying and not to hop on board just because there’s a squeeze. However, data from SunGard’s Astec Analytics doesn’t seem to back up his theory.
Ackman’s short of Herbalife
Of course Herbalife is the company that was dragged into the spotlight almost a year ago by Bill Ackman, who announced a $1 billion short position in it last December. He called it a pyramid scheme and said the stock would go to zero, but unfortunately for him, it’s done nothing but go up of late.
Maverick USA was down 3.3% for the second quarter, while Maverick Levered was down 2.1%. Maverick Long Enhanced was up 8%. Year to date, Maverick USA is up 31.8%, while Maverick Levered has gained 49.3%. Maverick Long Enhanced has returned 9.9% for the first six months of the year. Maverick Capital is a long/ short Read More
Reports have indicated within recent months that Ackman hadn’t moved to cover his short position in Herbalife Ltd. (NYSE:HLF). But what would it take for Ackman to move and cover? His paper losses on his short exceeded $10 million in May, and if Cramer believes a short squeeze is going on, then who’s covering? After all, Ackman may account for the majority of the short interest in that stock.
Signs of a short squeeze on Herbalife?
In spite of Cramer’s comments about a short squeeze going on in Herbalife Ltd. (NYSE:HLF) shares, data from one firm suggests today’s share rise may not be the result of a short squeeze after all. Tim Smith, executive vice president of SunGard’s Astec Analytics provided some commentary to ValueWalk after looking at the latest borrowing activity for Herbalife.
“Astec Analytics’ data would not appear to support the view that Herbalife shares have risen because of a short squeeze,” he told ValueWalk. “The fee for borrowing the stock is down and is currently around 1% pa. We would expect it to be much higher if there was a short squeeze. Utilization would also be 100% and it is not quite at that level yet but is still high at 95%. Volumes are also down and returns are outweighing the new volume of borrows today.”