Pershing Capital Management, the hedge fund headed by billionaire investor Bill Ackman, suffered a 2% decline in July due to his large short bet in Herbalife Ltd. (NYSE:HLF). The stock price of the multi-level nutritional supplement company continues to increase since legendary investor George Soros disclosed his position in the stock.
Rise in stock price of Herbalife
The stock price of Herbalife Ltd. (NYSE:HLF) is once again up by more than 1% to $67.49 per share on Tuesday morning trading in New York. Over the past 52-week range, the company’s stock value surged from its lowest level at $24.24 per share to its highest level at $67.99 per share.
In an interview with CNBC, former SEC Chairman, Harvey Pitt described Ackman’s complaint against Soros as a “desperation move” and the “pot calling the kettle black.” According to him, the disclosure of Sohn to hedge fund managers is a “far cry from necessarily establishing an insider trading.” He explained that to be able to establish insider trading, there should be mis-appropriation information. He emphasized that Soros is the owner of information, so even if there is a disclosure of information of interest in the stock, he opined that Sohn’s action is not considered a leak of non-public information.
However, he said that the situation also depends on what transpired during discussions, and whether there was an effort to try to persuade people to take a similar long position.
Short squeeze on the stock
Meanwhile, Robert Chapman of Chapman Capital commented that Herbalife Ltd. (NYSE:HLF) is an attractive investment, and described the allegation of illegal manipulation against Soros as preposterous and ultimate hypocrisy.
Chapman said, “The hutzpah of Ackman just astounds me – these accusations are coming from a guy who quietly communicates his activist activities to various, select other investors before making them sensationally public, a guy who without precedent and unapologetically just months ago corralled hundreds of soon-to-be-terrified Herbalife current and prospective shareholders into a PT Barnum style circus/horror show, and only after leaking his “new, best idea ever” to CNBC the day before.”
Ackman filed a regulatory complaint with the Securities and Exchange Commission (SEC) against Soros Fund Management in connection with his stake in Herbalife Ltd. (NYSE:HLF), according to a report from Michelle Celarier of the The New York Post.
Ackman accuses Soros of insider trading
The report indicated that Ackman accused Soros Fund Management of allegedly violating insider trading regulations by informing some hedge funds of his plan to purchase a 5% stake in Herbalife Ltd. (NYSE:HLF).
Soros revealed his long position in the multi-level marketing nutritional company, caused the stock price of the Herbalife Ltd. (NYSE:HLF) to increase by 10% last Wednesday. Last week, Fox Business News senior correspondent Charlie Gasparino reported that Ackman’s lawyers pressed the SEC to investigate Soros’ trading activity for potential insider trading.
In his letter to the SEC, Ackman alleged that Soros Fund Management tried to use the reputation of the billionaire titan and its chairman to devise a short squeeze against Pershing Capital’s $1 billion short bet on the shares of Herbalife Ltd. (NYSE:HLF).
A person who attended “idea meetings” with hedge fund managers informed Pershing Square Capital Management that Soros Fund Management’s portfolio manager Paul Sohn leaked that the hedge fund had been buying shares of Herbalife Ltd. (NYSE:HLF) in one of the meetings. Sohn revealed to hedge fund managers that Soros would soon report his 5% stake in the multi-level nutritional supplement company.
Pershing Square Capital believed that Sohn’s “idea talks” with hedge fund managers about the trading activities of Soros Fund Management violates insider-trading regulations. According to the hedge fund, he disclosed non-public market-moving information.
In a statement to The New York Post, Ackman said, “I’m very disappointed with George Soros as I think of him as a humanitarian. Instead, his firm is trying to profit off the backs of low-income Latinos who’ve been misled that Herbalife is the answer to the American dream.”