Herbalife is once again a pain spot for activist investor Bill Ackman, as he’s back in the red on his short position today. He said earlier this year (see interview below) that breakeven on his short of Herbalife stock is around the mid-$30s, including expenses. He said his firm Pershing Square shorted the stock at about $47 or $48 per share, after accounting for costs.
Since the financial crisis, Warren Buffett's Berkshire Hathaway has had significant exposure to financial stocks in its portfolio. Q1 2021 hedge fund letters, conferences and more At the end of March this year, Bank of America accounted for nearly 15% of the conglomerate's vast equity portfolio. Until very recently, Wells Fargo was also a prominent Read More
Herbalife still on a tear
This is the third time over the last four trading days that Herbalife has rallied. The multi-level marketing company’s stock is up 12% year to date, with most of that gain coming last Friday and Wednesday.
Last week it was announced that a lawsuit filed against Herbalife by a shareholder was dismissed, although Pershing Square pointed out that the dismissal had not cleared up the pyramid scheme allegations Bill Ackman has raised. The Federal Trade Commission is still investigating allegations regarding allegedly misleading statements made by some of its distributors.
Also there are signs of possibly another investigation involving the Securities and Exchange Commission.
Herbalife the subject of a short squeeze
It appears as if Herbalife’s rally today is due to a short squeeze, as the volume of shares traded soared to more than 6.35 million before noon. The average daily volume is just 2.77 million, so it’s likely some short-sellers are moving to cover their positions in the wake of that lawsuit dismissal.
Another positive point for Herbalife shares was the revelation earlier this month that Bill Ackman’s firm may be under investigation in connection with its short of Herbalife and his public campaign against the company. So far nothing concrete has come out on this topic, and neither Ackman nor his firm has been accused of any wrongdoing.
Clearly some short-sellers have seen the recent news flow surrounding Herbalife as reason enough to shed their positions. Also, today’s share price above $48 is close to the Nov. 4 price of $48.70 and suggested that this could be an important level to focus on as a trigger level for short covering on Herbalife.
We have reached out to Herbalife and representatives for Bill Ackman and will update this story if any comments are received.
Today the company’s stock rallied as much as 9.36%, climbing as high as $46.04 per share