Dan Loeb Makes It Official: Out of Herbalife Ltd. (HLF)

Friday’s 13G filing by Dan Loeb’s Third Point LLC reveals that the activist investor no longer has a holding in Herbalife Ltd. (NYSE:HLF).

The filing puts the seal on what has been known for a while.

Loeb’s valuation

Dan Loeb took the opposite side from Bill Ackman’s massive $1B short on Herbalife Ltd. (NYSE:HLF). Ackman has been asserting that the multi-level marketing company is nothing but a pyramid scheme, and that its real value is likely zero.

Michael Mauboussin’s 10 Attributes of Great Investors [Pt.1]

michael mauboussin, Credit Suisse, valuation and portfolio positioning, capital markets theory, competitive strategy analysis, decision making, skill versus luck, value investing, Legg Mason, The Success Equation, Think Twice: Harnessing the Power of Counterintuition, analysts, behavioral finance, More Than You Know: Finding Financial Wisdom in Unconventional Places, academics , valuewalkIn 2016, Michael J. Mauboussin completed his 30th year on Wall Street. The analyst, who was working at Credit Suisse at the time, decided to celebrate by reflecting on the ten attributes of great investors he had observed over the previous three decades. He published his ideas in a report in August 2016. I've summarised Read More

Loeb felt, however, that the company was undervalued and told shareholders of his fund in a January 9, 2013 letter that in his view it was a “compelling long term investment.” Loeb said in his letter that he had acquired an approximate 8% of Herbalife Ltd. (NYSE:HLF) in the panic selling that followed after “the short-seller’s (read: Bill Ackman) dramatic claims.”

He suggested Herbalife Ltd. (NYSE:HLF) shares could be worth $55-$68 and offered a potential upside of 40-70%. The stock then quoted around $38-39.

No pump and dump…

Interestingly, Loeb revealed in a November CNBC interview that he had picked up the Herbalife Ltd. (NYSE:HLF) stake for $28, but then gone ahead and sold it when the price rose to $44 per share. “That to us is a gift. We decided to take the money and run. So there was no pump and dump,” Loeb said.

…But not so long-term, either

In reality, Loeb’s Herbalife Ltd. (NYSE:HLF) bet lasted only 16 days, according to the New York Post. Though Loeb told an investment conference in May that he exited the stock because it had run its course, the Post has an entirely different spin on Loeb’s real motive.

According to the Post, which quoted his close associates, Loeb bailed from the stock “at least partially” because he received an inquiry from the SEC. However, this was denied by a Third Point spokesperson, acknowledges the Post.

What if he’d stayed the course?

Herbalife struck Loeb’s target of $68 in early September 2013, and went on to touch a high of $83.51 on January 8, 2014.

But from there it has crashed to $60.06 on Friday following a spate of news out of China deemed negative for Herbalife Ltd. (NYSE:HLF) and after a Massachusetts Senator wrote to federal regulators calling for an investigation into the company.

Is Ackman HLF-bashing again?

A CNBC report suggests Ackman might be behind huge ‘put’ bets against Herbalife Ltd. (NYSE:HLF) on January 9 (25,000 contracts) and on January 10 (20,000 contracts) – trades that could have cost the buyer of the puts an estimated $32M.

The size of the trade “fits Ackman’s M.O. perfectly,” says the CNBC article.