Bill Ackman concedes defeat on Herbalife
Bill Ackman has finally cried uncle on Herbalife.
More than five years after betting $1 billion that nutritional supplements company was a “pyramid scheme” and insisting its shares would go zero, the hedgie behind Pershing Square has unwound his money-losing short position.
The news was revealed as Herbalife’s shares soared more than 10 percent on Wednesday to an all-time high of $95.93, as the company announced it would buy back as much as $650 million in stock, refinance debt coming due next year and do a two-for-one stock split.
Ackman declined to comment, but Pershing Square’s position in Herbalife is now of “de minimis size,” a source familiar with the situation told The Post.
The full extent of losses on the Ackman’s failed billion dollar bet was not immediately known.
In November Ackman revealed that he converted his short position to a put position, a change in strategy that would benefit the fund if Herbalife shares fell. Instead, Herbalife shares have since soared 27 percent.
The stock hit fresh highs in recent weeks despite no news from the company, leading some to speculate that Ackman’s rivals on Wall Street might be buying Herbalife shares to ensure Ackman’s puts would be worthless.
Pershing Square declined to say when its puts were set to expire.
But the $8.8 billion hedge fund has been slashing the size of its large and costly position for some time, the source added following a report from CNBC, which first reported the fund’s exit.
In a January report, Pershing Square showed only 2 percent of short exposure, down from 4 percent it showed when it converted its short position to a put in October. Prior to switching to puts, the fund’s short exposure stood at 11 percent.
Ackman initiated a battle against Herbalife in December 2012, briefly sending shares down to the low $30s. But his nemesis Carl Icahn took the other side of the trade, eventually building up a 26.2 percent stake in the company.
Ackman’s failing bet had a glimmer of hope when the Federal Trade Commission launched an investigation into Herbalife in 2014. In July 2016, however, the FTC failed to deliver a fatal blow to Herbalife, instead reaching a $200 million settlement in which Herbalife agreed to change its business practices.
Since then, Herbalife’s stock has soared.
“Herbalife’s strong financial performance is a testament to the demand for our great-tasting, quality nutrition products, the company’s unique, effective and personalized distribution channel and the Company’s global geographic read,” CEO Rich Goudis said in a statement Wednesday.
Herbalife will also be changing its name to “Herbalife Nutrition,” the company said.
With the losing Herbalife position almost out of the way, Ackman’s fund is focusing on new position in United Technologies. A source familiar with the fund confirmed the investment in the industrial conglomerate but declined to say how big the investment was.
With additional reporting by Josh Kosman