Ackman cheers as Fidelity funds unload more Herbalife shares

August 12, 2016 4:01 PM EDT

A Herbalife product is seen at a clinic in the Mission District in San Francisco, California April 29, 2013. REUTERS/Robert Galbraith


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By Svea Herbst-Bayliss and Tim McLaughlin

BOSTON (Reuters) - One of Herbalife Ltd's largest investors sold more of the company's stock, just weeks after the U.S. government told the protein shake maker to reorganize its business, according to a filing with the U.S. Securities and Exchange Commission.

In an SEC filing on Wednesday, Fidelity Investments, the second largest investor in Herbalife (NYSE: HLF), said it had cut its stake in the firm to 7.4 million shares, a 14 percent reduction from the 8.6 million shares it reported owning at the end of June.

"The fact that Fidelity is selling is a good sign," said Bill Ackman, the billionaire hedge fund manager who bet $1 billion that Herbalife's stock would collapse.

Fidelity declined to comment.

The mutual fund's portfolio managers, including Steve Wymer of Fidelity Growth Company Fund, have been cooling on Herbalife in recent months. Boston-based Fidelity funds cut their stake in Herbalife by 26 percent in the second quarter, disclosures show.

Sales after the Federal Trade Commission fined Herbalife $200 million on July 15 could suggest sentiment may be souring more quickly on the $6 billion market cap nutrition and weight loss company.

The FTC ordered Herbalife to hire a monitor to track product sales and said the company had been deceiving hundreds of thousands of hopeful people.

Ackman, who has lobbied the government to shut Herbalife down, has called the company a pyramid scheme.

"There is no longer a bull case to be made for this stock," Ackman said on Thursday evening. With the stock price up 22 percent this year, he is sitting on several hundred million dollars of paper losses.

Ackman made his remarks after a screening of "Betting on Zero," a film that details his four-year battle with Herbalife.

Herbalife declined to comment, but the company's stock has rallied about 10 percent since the FTC fine was announced.

Other large investors, including Credit Suisse, Blue Mountain Capital Management and TIAA Cref Investment Management have also cut their stakes in the second quarter, according to new regulatory filings.

Some investors have loaded up on Herbalife, however, including William Blair Investment Management, which bought 1.5 million shares during the second quarter, SEC filings show.

Billionaire Carl Icahn, Herbalife's largest investor, has five representatives on the board. He owned 17 million shares on March 31 and has not yet released second-quarter holdings.

(Reporting by Svea Herbst-Bayliss; Editing by Tom Brown)



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