Shares of Herbalife Ltd (NYSE:HLF) have been climbing in recent weeks, especially over the last few days after the announcement about George Soros’ major position in the company. But the stock price isn’t the only thing that’s going up. Borrowing of Herbalife shares has also spiked in recent weeks—while the interest rate paid to borrow those shares is also rising.
Investors becoming skeptical of Herbalife?
Shares of Herbalife Ltd (NYSE:HLF), climbed 8 percent to a new 12-month high in the wake of the news about Soros’ stake in the company. Meanwhile, the borrowing data from SunGard’s Astec Analytics seems to suggest that investors are becoming increasingly skeptical about the soaring share price.
Karl Loomes of SunGard’s Astec Analytics spoke to ValueWalk and said as of right now, there have been about 22.5 million shares of Herbalife Ltd (NYSE:HLF) borrowed, with most of them probably being short sold. In the second week of July, there were about 16.4 million shares borrowed, and it’s been rising since then, climbing to 17.5 million shares as of July 25. After that date, he says borrowing of Herbalife shares became sharper. He also said this month so far that borrowing of the stock jumped about 10 percent.
GrizzlyRock Value Partners was up 34.54% net for 2021. The fund marked 10 years since its inception with a 198% net return, resulting in an annual return of 11.5%. GrizzlyRock enjoyed 14.8% long alpha against the S&P 500 and 26.9% against the Russell 2000. Q4 2021 hedge fund letters, conferences and more The fund's short Read More
According to Loomes, if borrowing increases at the same time as the share price is rising, this tends to suggest skepticism against the rising share price.
Carl Icahn vs. Bill Ackman
Activist investor Bill Ackman essentially started the controversy surrounding Herbalife Ltd (NYSE:HLF) late last year when he called the company a pyramid scheme and announced his large short position. The data from SunGard’s Astec Analystics shows a spike in borrowing before he made his announcement. There’s little doubt that he’s responsible for that spike.
Carl Icahn bet against Bill Ackman, and he told Liz Claman of Fox Business Network this week that he has made $500 million on his long position in the company. Julia La Roche of Business Insider reports that regulatory filings indicate Icahn Associates holds a 16.46 percent stake in Herbalife Ltd (NYSE:HLF). Since Ackman announced his short, shares of the company have increased by more than 56 percent.