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Hedge fund titan Bill Ackman, who has been in the spotlight for his Herbalife short, is answering investor questions live at the Harbor Investment Conference at JPMorgan Chase right now. Ackman’s $12 billion Pershing Square Capital Management is shorting more than 20 million shares of Herbalife. Ackman believes the multi-level marketing company that sells nutrition products is a “pyramid scheme” and has a price target of $0.
We’re on site and live blogging Pershing Square Capital Management’s responses. Refresh this page for updates.
Before the Q&A, Ackman auctioned off lunches with himself and the others who presented today. Blue Mountain’s Andrew Feldstein lunch brought in $30,000.
Now we’re gettng to the Q&A, but first Ackman is going to talk about his Herbalife short.
“We short very few stocks at Pershing Square,” he said saying that shorting has certain inherent risks.
The biggest risk is no company likes for you to have a view that the stock is going to go down, the activist investor said.
“After 18 months of work and assistance of some of the top law firms in the country we’ve included that it’s a pyramid scheme.”
He says Herbalife has hidden behind a product and that it’s a company that hurts poor people.
The biggest risk Pershing Square took is whether or not they could get enough of a spotlight the FTC, the SEC or the Attorneys Generals around the country? “I was quite confident we attracted the world’s attention.”
“Carl Icahn thank you very much and Dan Loeb thank you as well.”
He said this made it an interesting question… “Am I right?”
The catalyst was publicity, he said. He says he has his “friends in the business” to thank for that.
Ackman put 284 questions out to Herbalife last week.
“Every question we asked a company that’s not a pyramid scheme could answer in 20 minutes.”
Now it’s time for questions. He says he’s willing to answer anything even Herbalife questions. “I’m obsessed with Herbalife,” he said.
- An update on the Hong Kong Dollar: At the time our view was that it was the most undervalued currency in the world because it was pegged to the U.S. dollar, Ackman says. Because it’s been pegged the volatility has been low, he explained. He says the peg no longer makes sense and that he thinks the peg will be lifted, he said.
- JCPenney update/ what “plan b” could be?: He says CEO Ron Johnson has done a lot in the 13 or 14 months. What he had a tougher time with is the decision to completely withdraw promotions, he said. The consumer base was used to coupons. So Johnson took the price down to the level where the consumer would want to buy it. “The other major accomplishment is if you go into a JCPenney today it’s a completely different experience compared to what it was 18 months ago…” The problem, he said, is once those promotions were taken away is getting the consumer in. He says the company has responded with the circulars and advertisements by including a reference price. He says he’s also bringing sales back at relevant times. He says the press has been very negative and Ron gets picked on more than any other CEO in the country. He noted that one investing tip is when people take a bearish look on a CEO that’s the time to take a look at a company. Another significant thing is by the beginning of May the home section will be a whole “shop.”
- What if JCP’s plan doesn’t work?: It’s hard for me to imagine a scenario in which sales don’t stabilise.
- How long do you think it will take for the market to see Herbalife for what it really is? (His famed MBIA short took about 7 years): He said when he went public the first time with his MBIA short he was much less well known and MBIA generated a bunch of profits for some buldge bracket banks. The difference today he said is you have to look at who’s being helped and who’s being harmed. He says “you don’t want to short a stock unless it’s good for America for the company to disappear.” He says you have a handful of top Herbalife distributors making a lot of money and millions who have lost money as HLF distributors. This is a company that uses the American dream, climb the later to induce lower income people and Hispanics. “If the FTC misses Herbalife, it’s the equivalent of the SEC missing Madoff.” He says he’s quite confident and that this short will happen much more quickly. The other catalyst he says the company files the 10-K in the third week in February. He says KPMG should probably take a “very, very careful” look at that financial statement before they slap their brand on it.
- Thoughts on Apple?: “I think it’s an credible company. I love the products. We never owned Apple.”
- Thoughts on Burger King: He says if you try the new chicken sandwich “it’s unbelievable” and there’s probably no horse meat in it he joked.
The Harbor Investment Conference is an annual event that brings together some of the industry’s top investors to share trade ideas and raise money for the Boys & Girls’ Harbor. Ackman and Mark Axelowitz, managing director from UBS Private Wealth Management, co-host the conference.
Produced by Daniel Goodman