Shane Dinneen, the young Pershing Square analyst who worked on the fund’s Herbalife short, has broken his silence since resigning from the hedge fund several months ago.
He’s also been writing incredibly long comments on Herbalife-related articles. So it looks like we could be hearing more from him.
Here’s his summary from his first SeekingAlpha post:
- Herbalife’s headline numbers in Q1 appear good at first blush, but below the surface, cracks are beginning to appear in the foundation.
- Herbalife’s write-down in Venezuela in Q1 should have been bigger. Had the company used the SICAD II rate to re-mark its books, GAAP EPS would have been ~ZERO.
- Adjusting for the effect of exchange rate changes on cash, cash flow from operations DECLINED 25% vs. Q1’13.
- Dividend cancellation could indicate Herbalife is concerned about having sufficient distributable reserves at its parent company and US subs to meet its previously reported dividend, repurchase and capex guidance.
- Various red flags in Q1 suggest the business could be headed for a slowdown (not a good thing for a momentum-driven business).
Dinneen played a major role in putting together Pershing Square’s Herbalife short position.
In December 2012, Pershing Square publicly delcared that it’s short $US1 billion worth of Herbalife stock.
Pershing’s founder Bill Ackman said he believes the company operates as a “pyramid scheme”. He’s betting that the stock will go to $US0 because regulators, specifically the Federal Trade Commission, will investigate the company and shut it down.
Dinneen got to help Ackman give a massive 342-slide presentation at that special Sohn event. That’s something that most young analysts will never get to do in their career.
In the months that followed, though, the stock rose higher and Pershing Square had amassed hundreds of millions in paper losses.
In the beginning of this year, Ackman sent a letter confirming that Dinneen had resigned from the fund a while ago. Prior to that, the Twittersphere had been speculating that Dinneen was no longer in Pershing’s offices.
In his investor letter, Ackman called Dinneen “one of the most talented investment analysts” he had ever worked with and someone he holds in “high regard.” He also said that Dinneen is welcome back at Pershing Square at any time.
Just last month, Herbalife confirmed that it’s being investigated by the FTC.
Pershing Square still hasn’t broken even on its Herbalife short.
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