Some Have the Guts to Bet Against Ackman on Herbalife (HLF)

December 26, 2012 1:17 PM EST Send to a Friend
Some smart, fraud-sniffing traders are taking the other side of Bill Ackman's Herbalife Ltd. (NYSE: HLF) trade. A risky proposition for sure.

In a tweet earlier, Kerrisdale Capital said they are now long the stock.

We've gone long $HLF at this $26 level. The internationally diversified nature of HLF makes it impermeable to short attacks, we think

The trade is notable given that Kerrisdale often focuses on overvalued situations on the short side.

Since Ackman disclosed his short last Wednesday, shares of Herbalife are down 34 percent taking into account today's 8 percent rally. Ackman labeled the company a "pyramid scheme" and said it misrepresents its sales figures, misleads distributors about the earnings potential and sells a commoditized product at inflated prices.

Ackman laid-out a blistering, 342-page presentation on his short thesis last Thursday and launched a website dedicated to the stock: factsaboutherbalife.com. Fellow hedge fund investor Whitney Tilson, who is short "a tiny smidge", called Ackman's analysis of Herbalife "the most remarkable piece of investment analysis I have ever seen."

In addition to traders looking for a quick short squeeze in the stock, the company is fighting back. The firm tapped law firm of Boies, Schiller & Flexner LLP to provide counsel regarding the attacks from Ackman and will host an investors day on January 10, 2013. The company also said that it now expects to exceed its previously announced quarterly guidance of $50 million of the repurchase authorization in upcoming quarters and retained Moelis & Company as its strategic advisor.


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