Herbalife (HLF) is Pure, Unadulterated, Hedge Fund Porn
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As hedge fund investor Bronte Capital put it, Bill Ackman's big short on Herbalife Ltd. (NYSE: HLF) is the equivalent of "hedge-fund porn."
On one side of the trade you have: Ackman and his multi-billion dollar Pershing Square Capital hedge fund that has gone 'balls to the wall' on the Herbalife short; Ackman's crack research team that spent a year digging into the company and putting together a blistering, 342-page presentation which observers have called "the most remarkable piece of investment analysis ever seen"; other notable short sellers that may include David Einhorn of Greenlight Capital, Jim Chanos of Kynikos Associates; and of course a business that has been built around downstreams and suckers.
On the other side of the trade you have: the Company, which has successfully built a multi-billion dollar business by selling overpriced, commoditized products that no one has ever heard of (one of Ackman's key arguments BTW); fringe hedge fund investors that have known about the Herbalife story for years and years and believe Ackman is late to the game and won't win. Some, including Bronte Capital, are betting against him. In fact, Bronte broke out the way-back-machine and noted how Ackman's old and now-shuttered hedge fund Gotham Partners was bullish on another MLM scheme called Pre-Paid Legal that got the fund into trouble with Elliot Spitzer, although the investigation went nowhere.
The action in the stock over the past week or so has not disappointed hedge fund porn enthusiasts. After falling as much as 43 percent after Ackman disclosed he was short, shares have rebounded 25 percent.
Keeping with the porn theme, voyeurism in this case may prove to be wise for the faint of heart. However, if you are the more adventurous type, getting involved in the action is just a trade away.
On one side of the trade you have: Ackman and his multi-billion dollar Pershing Square Capital hedge fund that has gone 'balls to the wall' on the Herbalife short; Ackman's crack research team that spent a year digging into the company and putting together a blistering, 342-page presentation which observers have called "the most remarkable piece of investment analysis ever seen"; other notable short sellers that may include David Einhorn of Greenlight Capital, Jim Chanos of Kynikos Associates; and of course a business that has been built around downstreams and suckers.
On the other side of the trade you have: the Company, which has successfully built a multi-billion dollar business by selling overpriced, commoditized products that no one has ever heard of (one of Ackman's key arguments BTW); fringe hedge fund investors that have known about the Herbalife story for years and years and believe Ackman is late to the game and won't win. Some, including Bronte Capital, are betting against him. In fact, Bronte broke out the way-back-machine and noted how Ackman's old and now-shuttered hedge fund Gotham Partners was bullish on another MLM scheme called Pre-Paid Legal that got the fund into trouble with Elliot Spitzer, although the investigation went nowhere.
The action in the stock over the past week or so has not disappointed hedge fund porn enthusiasts. After falling as much as 43 percent after Ackman disclosed he was short, shares have rebounded 25 percent.
Keeping with the porn theme, voyeurism in this case may prove to be wise for the faint of heart. However, if you are the more adventurous type, getting involved in the action is just a trade away.
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William Ackman, Pershing Square Capital, Greenlight Capital, David Einhorn, Hedge Funds, Jim Chanos, Kynikos AssociatesSign up for StreetInsider Free!
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