Herbalife: One Year After Ackman’s Attack


It’s been almost a year since billionaire investor Bill Ackman attacked Herbalife Ltd. (NYSE:HLF) with his infamous 342-page presentation at the Ira Sohn Conference on December 19, 2012. The Pershing Square chief disclosed a $1 billion short bet in Herbalife Ltd. (NYSE:HLF) He said the nutritional supplement maker’s business model was a pyramid scheme, and its stock would collapse to zero. Herbalife Ltd. (NYSE:HLF) shares lost almost half their value in the next three days.

Herbalife navigates through hurdles

After one year, the stock is trading well above $76, up 160% from its December 21, 2012 trough of $26.06. Even after his initial claims, Ackman didn’t give up. He did another 300-page presentation, sent a letter to PWC, the new editor of Herbalife Ltd. (NYSE:HLF), and lobbied in Washington, according to Barclays analyst Meredith Adler. Herbalife Ltd. (NYSE:HLF) recently re-audited its financial statements, and re-filed its 10-Ks for 2011, 2012 and 2013.

Herbalife Ltd. (NYSE:HLF) became more aggressive in September this year after its shares jumped above $70. The Grand Cayman-based company hired a strategic adviser and asked Pershing Square shareholders to dump shares of Ackman’s firm. Herbalife Ltd. (NYSE:HLF) highlighted the risks of $1 billion short bet in the nutritional supplement maker.

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Clash of titans over Herbalife

After Bill Ackman’s presentation on Herbalife Ltd. (NYSE:HLF) last month, the nutritional products company said that Ackman had nothing new to say after a year of baseless claims and losses that ran into hundreds of millions. Carl Icahn, who became the largest shareholder of Herbalife Ltd. (NYSE:HLF) in May this year, said most of the things that Ackman said were nothing but the “rantings of a sore loser.” After Ackman disclosed his $1 billion short position, many reputed investors including Carl Icahn, George Soros, Kyle Bass, Dan Loeb and Stan Druckenmiller went long on Herbalife Ltd. (NYSE:HLF) and made millions of dollars.

D.A. Davidson analyst Tim Ramsey said in a research note to investors that Herbalife Ltd. (NYSE:HLF) has undergone intense scrutiny that is unheard of in recent times. He believes that Herbalife Ltd. (NYSE:HLF) has successfully navigated through all the hurdles, and will now have a growth stock valuation. The company’s business model has proved itself. It’s only a matter of time before Herbalife Ltd. (NYSE:HLF) gets the status of a hyper-growth company.

Ramsey added that the company may also announce a share buyback, which would easily add at least $1 a share depending on the size, timing and level of buyback. D.A. Davidson has a Buy rating on the stock. Ramsey increased the 12-month price target from $92 to $115.

Herbalife Ltd. (NYSE:HLF) shares jumped 1.30% to $75.83 at 10:43 AM EST.