Hedge fund manager Bill Ackman of Pershing Square was just on Bloomberg TV’s “Market Makers” talking about his infamous Herbalife short.
“We’ve actually come up with some new stuff,” Ackman said before showing a clip of an internal Herbalife video from 2005 he says shows deceptive recruiting practices.
According to Ackman, the video shows one of Herbalife’s top distributors speaking, and it makes them look pretty bad. It’s a three-hour long presentation (you can watch a short clip below).
Perhaps that’s fitting for a crusade that’s lasted two years like Ackman’s crusade against Herbalife.e
In December 2012, Ackman gave a 342-slide presentation publicly declaring that he was short $US1 billion worth of Herbalife shares. Ackman believes that the company operates as a pyramid scheme that targets poor people, especially those from the Hispanic population.
His investment thesis is predicated on regulators, specifically the Federal Trade Commission, shutting the company down. (The FTC opened an investigation into the company back in March of this year.)
Ackman is shorting the company to $US0. He has said that he will take this short to the “end of the earth.”
After Ackman’s initial presentation, numerous fund managers, most notably Ackman’s longtime rival Carl Icahn, piled on by going long the stock.
The stock also surged in the months that followed. In October 2013, Ackman had to change the form of his short position. He said he covered a big chunk of hte short and bought put options.
He said this has “increased the potential for profit, but reduced the amount of capital at risk.”
The position if about 7% of Pershing’s portfolio. At its peak, it was 15%.
“But the opportunity for profit is greater than it was at the peak.”
It has definitely been a crazy ride up and down for the last two years.
Shares of Herbalife have fallen about 50% this year. It looks like Ackman is back in the money. The stock was last trading down 2.6% during Ackman’s interview on Bloomberg.
Ackman said that the risk/reward looks more appealing now. He said the risk of the stock going to $US50, $US60 or $US70 has “gone down enormously.” He said he thinks the business is “deteriorating” and there’s no longer a bull case for the stock.
This summer, Ackman and Icahn made up after a decade-long rivalry. Icahn has said he hasn’t sold a single share.
Ackman told Bloomberg he has not had a recent conversation with Icahn.
“Unfortunately, I think he’s kind of stuck,” pointing out that Icahn is on the board and he can’t sell.
“I’d love to see him sell. I think it would be great to see him sell…I think he’s a stuck holder.”
He said Icahn will be fine, though.
Here’s the new video:
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