Icahn Adds Up $230M to War Chest to Squeeze Ackman's Brains Out in Herbalife (HLF)
After disclosing a nearly 13 percent long position in Herbalife in mid-February, yesterday Mr. Icahn and the company reached an agreement to nominate two Icahn representatives to the Board of Directors. The agreement also grants Icahn the right to increase the size of his ownership position in Herbalife up to 25 percent of the outstanding common stock. Currently he owns about 14 percent.
Mr. Ackman, for his part, is short over 20 million shares of Herbalife and is steadfast in his belief that the company is a 'pyramid scheme' and will eventually be worth zero.
While Ackman may ultimately be right, timing is everything in the short game. As economist John Maynard Keyes famously warned, "Markets can remain irrational a lot longer than you and I can remain solvent."
Mr. Icahn seems hellbent on helping the markets in this case. While he won't admit it publicly, Mr. Icahn's trade in Herbalife appears to have little to do with the fundamentals of the company - as he claims - and more about getting Ackman's head on a spike.
Overnight, Icahn put the odds a little more in his favor after raising over $200 million for his Icahn Enterprises, L.P. (NYSE: IEP) fund. He sold 3,174,604 shares of depositary units at $63. He may raise another $30 million if underwriters exercise the over-allotment.
$230 million = 5.6 million Herbalife shares. Of course, he could buy on margin and get even more. These could be the figures going through Ackman's head today on the news.
Shares of Herbalife are up 4 percent today to $41.59.