Herbalife Ltd. (NYSE:HLF) has apparently been taking cues from Bill Ackman’s attack. However, the company is being a lot sneakier about what it’s up to. Katherine Burton, Duane D. Stanford and Pierre Paulden of Bloomberg Businessweek report that Herbalife has been approaching investors who have money in Ackman’s Pershing Square fund and urging them to pull their money out. Instead of announcing the strategy publicly like Ackman did, the company is working behind the scenes.
Herbalife turns the tables on Bill Ackman
They cite sources familiar with Herbalife’s strategy. The company is reportedly arguing that Ackman’s best against it is irresponsible and risky. The activist investor has lost up to $500 million in his short of Herbalife Ltd. (NYSE:HLF). Herbalife also claims that Ackman made his short bet a personal issue and that by placing nearly 10% of Pershing Square’s assets into his short position, he was putting too much risk into the fund.
Moelis & Co., which is an investment bank which works with Herbalife, reportedly set up a meeting with Cliffwater LLC, a firm which provides advice to clients about their investments into hedge funds. Herbalife executives were said to have been invited to that meeting as well. According to the report, Moelis also contacted New Jersey’s pension fund, which currently has $207 million invested in Ackman’s Pershing Square fund. At this point, however, the $76.7 billion pension fund has apparently not met with Herbalife.
Ackman complains to Moelis
Herbalife was said to have hired Moelis last year to help it “strategically position” itself. The company reportedly decided to start contacting Pershing Square investors over the last couple of months. Bill Ackman apparently called Moelis to complain after he learned of Herbalife’s decision to start contacting his clients.
Moelis and Ackman have apparently known each other for years and even worked together on other activist campaigns, including one against The Procter & Gamble Company (NYSE:PG) last year.
Other investors oppose Ackman
Shares of Herbalife Ltd. (NYSE:HLF) have more than doubled so far this year thanks to investments from major investors opposing Bill Ackman. Carl Icahn, Kyle Bass, Bill Stiritz, George Soros and Stan Druckenmiller have all poured money into Herbalife this year, betting that Ackman is wrong.
It has been about a year since Ackman publicly announced his $1 billion short of Herbalife, calling it a pyramid scheme and saying he believed the stock would go to zero. There were indications that Ackman moved to cover part of his short position over the last few months.
Meanwhile Ackman’s attacks on the nutritional supplements company have continued as he contacted the company’s new auditor PricewaterhouseCoopers and tried to push regulators into investigating Herbalife as a pyramid scheme. Ackman also made a new presentation against Herbalife Ltd. (NYSE:HLF) last month at the Robin Hood investors’ conference.