Herbalife (HLF) Gets Ack-Attacked

December 20, 2012 3:51 PM EST
Hedge fund guru Bill Ackman of Pershing Square Capital has sunk his teeth into multi-level-marketing (MLM) company Herbalife (NYSE: HLF). Mr. Ackman disclosed he was short the stock on Wednesday, ahead of a presentation at today's Ira Sohn conference. At the conference, Mr. Ackman and two of his employees laid out a relentless, three-hour long attack on the company, which he calls a "pyramid scheme."

Shares of Herbalife, which were down 12 percent on Wednesday, sank another 10 percent today to $33.63.

Ackman said his firm has an "enormous short position" in the stock that he believes will eventually go to zero. He said he is short over 20 million shares and promised to give 100 percent of his profits on the shorts to charity.

Bill Ackman, CEO of Pershing Square Capital Management, spoke with Bloomberg Television's Erik Schatzker and Stephanie Ruhle about Herbalife and said that "this is the highest conviction I have ever had about any investment I have ever made, full stop."

At the conference, Ackman said the company misrepresents its sales figures, misleads distributions about the earnings potential and sells a commoditized product at inflated prices.

Herbalife is denying all the claims, saying they've been in business for 32 years and have millions of customers worldwide. CEO Michael Johnson painted Ackman as a market manipulators, pointing to an extraordinary number of puts options on the stock that are due to expire this Friday. They urged the SEC to investigate the issue. Ackman, for his part, said he is not employing an option strategy.

Ackman may be in good company with his short bet. In May, Greenlight Capital's David Einhorn grilled executives about its business model. While many believe that Einhorn is in fact short Herbalife, he has not disclosed an actual beat against. Jim Chanos, another famous short seller, may also be short Herbalife, according to a recent report from Reuters.

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Another Scam
Scott Johnson on 2012-12-20 15:58:32
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