Herbalife Ltd. (HLF): Ackman Pulls Stunt to Help Out His Put Options

Herbalife Ltd. (HLF): Ackman Pulls Stunt to Help Out His Put Options

Bill Ackman of Pershing Square Capital Management “pulls some stunt to help out his put options” every quarter, according to Herbalife Ltd, in response to the bombshell statement of the activist investor against the company.

Ackman pulls stunt to benefit his portfolio

In an emailed statement to Bloomberg News, Herbalife spokesman Alan Hoffman said, “Each quarter Bill Ackman pulls some stunt to help out his put options and drive down the stock price all to benefit his billion-dollar portfolio.”

Hoffman added, “All companies evolve and selectively picking out a few anecdotes that are close to a decade old does not accurately reflect the current activities of the millions of members and customers who use our products on a daily basis.”

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Herbalife distributors submitting evidences

During an interview with Bloomberg Television yesterday, Ackman said many of the former employees and top distributors of Herbalife are submitting evidences against the company to states and Pershing Square.

The DOJ, FBI, FTC, SEC and attorney generals in different states are investigating allegations against Herbalife. Ackman believed that government prosecutors are closing in on the company, which strongly and repeatedly denied the accusations.

Ackman provided a 2005 video showing a top Herbalife distributor admitting that the company is operating a pyramid scheme. The activist investor also indicated that the videos filmed by distributors showed Herbalife executives acknowledging that their recruiting tactics are deceptive and most distributors have a small chance to succeed.

Last week, Pershing alleged that Herbalife distributors are “routinely making false, dangerous and illegal medical claims to potential customers.”

Ackman has been running a two-year campaign against Herbalife since 2012. The activist investor believed that Herbalife is the world’s best-managed pyramid scheme. He initially shorted 20 million shares of Herbalife worth $1 billion. The activist investor repositioned his short position on the stock. He 40% of the short positions for put options.

The activist investors believed that the risk associated with his bet against the shares of Herbalife has been reduced based on its financial performance and it “running out of victims.” Ackman predicted Herbalife’s implosion will be on 2015 (worse case early 2016).

He is confident because of the fact that the company has more than $1 billion debt due on early March of 2016, which he believes the company will not be able to refinance that credit facility.

Over the past 52-weeks, the stock price of Herbalife dropped from its highest level at $83.51 to as low as $35.45 per share.  At the time of this writing, the stock is trading around $37.96 per share.

Also see Ackman’s latest interview

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