Financial Times: You have received a lot of good press, but there has also been some criticism of some of the investment stances you have taken and also your trading techniques, specifically the short selling. In a way, your philanthropy does not seem to fit with how you live your professional life. How would you respond to that assertion? Bill Ackman: I think we’ve accomplished more for society in our for-profit activities than in our not-for-profit activities. My work with the Pershing Square Foundation is a continuum of what I do in my professional life. When the Foundation sees a problem we always ask if there is a business solution. I think most of the criticisms you have heard relate to my position on Herbalife. If I manage to close down that company I will consider it the greatest achievement of my life. [FT]
Pershing Square
Guy Trades Dream Of Making Millions Selling Herbalife For New Dream Of Making Millions Suing Herbalife
By Matt Levine
It’s a little surprising that it took this long for someone to sue Herbalife, isn’t it? Whether or not Bill Ackman is right about Herbalife being an illegal pyramid scheme, he did take the trouble of writing like 300 pages about it, which is usually more than enough to inspire some intrepid class action lawyer to cut and paste the most damaging claims into a complaint and see where it goes. Perhaps they were stymied by converting from PowerPoint. Anyway here you go:
California resident Dana Bostick is suing Herbalife under racketeering and corruption laws, accusing the company of being an “inherently fraudulent pyramid scheme.” …
While Herbalife has settled suits brought by former distributors in the past, Bostick is the first to go to court since Herbalife became a battleground of hedge fund titans. Ackman has faced off against Dan Loeb and Carl Icahn, who owns a 15 percent stake in Herbalife. … The suit, which also seeks class-action status, claims around 88 percent of Herbalife’s 500,000 US distributors do not make any money.
The complaint is here and it’s … mostly it’s just sad. On a first reading it’s not entirely clear how you should apportion blame for the sadness; I don’t know if this says more about Herbalife or Dana Bostick: Read more »
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Hedge Funds
Bill Ackman To Get JCPenney Ticker Symbol Tattooed To His Ass, Or Something
By Bess Levin
That or he’s going to burn all his clothes and replace them exclusively with items exclusively purchased at the retailer, or hell, just move into the place. Whatever it takes to show he’s more committed to this place than ever. Read more »
Bill Ackman And David Einhorn’s Love Blossomed On A Subway Platform But Now They Might Not Even Give Up Their Seat If The Other One Was Pregnant
By Bess Levin
Henry Winkler once said, “Assumptions are the termites of relationships.”1 In 2011, Bill Ackman assumed it was okay to talk to The New York Times about David Einhorn’s business and, like a homeowner forced to move out for three days while a pest control company sprays the place, he’s been forced to pay. Big time. Read more »
Bill Ackman Is Still Thinking About Filing An Appeal Against The SAT Board For Those 4 Questions He Got “Wrong” In 1984
By Bess Levin
In 1984, when he was a junior at Horace Greeley High School, in affluent Chappaqua, New York, he wagered his father $2,000 that he would score a perfect 800 on the verbal section of the S.A.T. The gamble was everything Ackman had saved up from his Bar Mitzvah gift money and his allowance for doing household chores. “I was a little bit of a cocky kid,” he admits, with uncharacteristic understatement. Tall, athletic, handsome with cerulean eyes, he was the kind of hyper-ambitious kid other kids loved to hate and just the type to make a big wager with no margin for error. But on the night before the S.A.T., his father took pity on him and canceled the bet. “I would’ve lost it,” Ackman concedes. He got a 780 on the verbal and a 750 on the math. “One wrong on the verbal, three wrong on the math,” he muses. “I’m still convinced some of the questions were wrong.” [Vanity Fair]
Earlier today it was noted that, to the surprise of many, Bill Ackman and Carl Icahn had refrained from asking questions or dialing in and making sudden outbursts during this morning’s conference call to discuss Herbalife’s fourth quarter earnings. Obviously this came as a shock on account of Ackman and Icahn taking many opportunities in the past to share their feelings re: the company and each other. And while it’s true both men personally held their tongue’s today, according to Pershing Square, one of its analysts had planned to ask questions on Bill’s and the hedge fund’s behalf but was shot down. Read more »
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Hedge Funds
What? Carl Icahn Just Thinks Selling Diet Shakes And Herbal Tea Is A Really Good Business
By Matt Levine
Yesterday Carl Icahn filed a 13D disclosing a ~13% synthetic stake in Herbalife. There are three possible reasons that Carl Icahn might want to own half a billion dollars worth of Herbalife stock:
- as a value investment in a company with strong cash flows and a beaten-up stock price,
- as a toehold in preparation for launching a tender offer to take the company private, or
- to fuck with Bill Ackman.
If you watched Icahn and Ackman square off on CNBC, or read the transcript, or witnessed some sort of dramatic recreation of it, I think you’ll join me in assuming it’s sheer fuck-with-ery. “Cry, Jewish boy, cry!,” he probably said as he signed the 13D. But who knows? He’s up $80+ million as of this morning, so two birds with one stone.
A curiosity of this position is that it’s mostly synthetic: Icahn owns about 2.5 million actual shares and about 11.5 million call options. Like so:
As we’ve discussed before, this is Icahn’s standard M.O., and it’s not because his dealers are dummies who will sell him levered upside on a stock that he can move with just a lift of his magnificent eyebrows. Read more »
If you have an opinion on whether Carl Icahn or Bill Ackman got the better of today’s amazing CNBC shoutfest over Herbalife, you have a number of options for expressing it. We’ve had like four posts so, y’know, comment away, but if you want something more formal both CNBC and Business Insider have polls you can vote on. Also if you listen to CNBC’s video you can hear in the background a bunch of men who, when not oohing and ahhing over cursing on television, spend their days running around pretending to trade stocks. Don’t be fooled, though: you can actually trade stocks, even Herbalife’s. If Icahn-Ackmania changed your view of Ackman’s short thesis on Herbalife, feel free to express that changed view with money.
As of 4pm-ish, BI and CNBC both give Ackman the win. Mr. Market goes the other way, though without overwhelming enthusiasm.1
This makes sense – as a former high school debate judge I’d score this one for Ackman too. On style alone: Icahn apparently did his interview in a zen garden surrounded by a team of silent and efficient researchers; Icahn prepped by going to a Queens schoolyard and getting in fights.
But on substance, too. Icahn’s main claim, that shorting a company and then saying mean things about it is “manipulation” or otherwise bad form, is sort of crazy; Ackman’s zen researchers helped him point out that Icahn did just that at Ira Sohn in 2003. More important, though: how does Icahn’s “you can be short, but you can’t tell anyone” thesis – as he says, “If you’re short, you go short and hey, if it goes down you make money” – hold up when applied to long investing? Read more »
When Mark Hughs founded a multi-level marketing company called Herbalife in 1980, he probably thought it had the power to do a lot of things. Help people lose weight. Makes others rich. Shake up the diet industry. What he mostly likely did not expect, however, was that his li’l company that could would reignite a feud between two billionaires that would devolve into a flurry of press releases quibbling over who was dying to be friends with whom, shouting matches on live TV, and, we predict, someone telling someone else he has a right mind to “Rip the eyes out of your head and piss into your dead skull! You messed with the wrong hedge fund manager!” Read more »
Herbalife Wants To Resolve Its Differences With Bill Ackman With A Hug And/Or A Lawsuit
By Matt Levine
I don’t really know what to tell you about Herbalife’s investor day presentation this morning. One thing that’s definitely true is that it was shorter than Bill Ackman’s anti-Herbalife presentation a few weeks ago, which the Herbalife team seemed inordinately proud of, since, like, the Ring Cycle is shorter than Ackman’s presentation. It was … guys, honestly, it was creepy, the word is creepy. Here is where Herbalife’s president, Des Walsh, made me particularly uncomfortable:
“It’s about a shake, a tea, an Aloe — and a hug. I know in this community, hugging is not something you do a lot. But the world needs more hugs. And they find them, along with good nutrition, in the nutrition clubs.”
That’s from DealBook’s live blog, which collects the highlights. (DealBook also has a good breakdown of the legal issues involved in “is Herbalife a scam?”) Ackman has already responded, arguing that Herbalife distorted his arguments and failed to address a lot of his points. This is true, though Herbalife definitely scored some “Ackman-is-distorting-our-business” points too; the whole thing seems likely to become a drawn-out contest of two sides talking past each other, at maximum length.1 Read more »
Does Your Next Food Eating Challenge Involve Binge Drinking Herbalife’s Formula 1 Nutrition Shake?
By Bess Levin
As many of you know, around these parts we are constantly debating the merits of various financial services employees’ food eating challenges. Historically, we’ve detracted points for allowing the participants far too much time to complete the task at hand (opening bell to close, might as well just make it limitless), an insufficient volume of food (a box of Munchkins, considered by many to be a snack), and lack of originality (vending machine challenges have been done). On the flip side, we’ve applauded creativity (an investment banker and 500 Starburst enter a room and there’s a webcam involved),* obscene amounts of food and enough sugar to cause hyperglycemia (244 oysters, a cupcake of death), and topicality (the delicacy that is the Sausage Pancake Bite: yes! Double Downs: double yes!).
Which brings us to this: the Herbalife Food Eating Challenge. New York Observer reporter Patrick Clark noticed that while the Herbalife story has been covered by many an angle so far (the blood-sucking pyramid scheme angle, the grandma angle, the Dan Loeb/UWS hedge fund manager on UWS hedge fund manager angle), the most important angle of all had yet to be explored: the actual ingesting of this stuff angle. Read more »
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