It is rare for two hedge funds to butt heads, but when two very successful hedge fund managers do so, it makes for interesting theatre. Bill Ackman, activist, investor and CEO of Pershing Square Capital Management has an enormous short (20 million shares) on Herbalife, a multi-level marketing company that sells weight management supplements: he expects the price to hit $0, and the company to fail. He called it a pyramid scheme in a presentation that consisted of 342 slides and took three hours to deliver.
Dan Loeb, CEO of Third Point, whose firm holds a little over 8 per cent of Herbalife, rubbished Ackman’s claim and, in his latest letter to investors (he vehemently argues that Herbalife is a great investment), called Ackman’s claims ‘preposterous’.
Herbalife has fallen nearly 6 per cent since 18 December, when Ackman confirmed that he had a short sell on the company. At one point, Herbalife’s stock was down nearly 40 per cent. Ackman has said that any profit he makes from the short will go to charity.
(This story was published in Businessworld Issue Dated 21-01-2013)