Bill Ackman's Herbalife short is backfiring — again
By: Kaja Whitehouse March 23, 2015 5:38 pm
It was little more than two months ago, in early January, when hedge fund honcho Bill Ackman was on top of the world.
His hedge fund, Pershing Square Capital, was crowned the top fund of 2014 after posting gains over 40%, well above the industry average of closer to 2%.
What’s more, Ackman’s controversial bet against nutritional drink company Herbalife, which had been causing him grief for two long years, was about to start paying off. The stock posted a loss of 52% in 2014 before falling another 15% in the first week of January — placing Ackman’s $1 billion short on the verge of breaking even.
Indeed, Ackman was so confident the tide was about to turn that he donated $10 million to a charitable organization called TheDream.US. He called the donation “an advance” on his vow to donate all of his personal profits from the short sale to charity, he told USA TODAY at the time.
“It’s been a mixed bag, for sure,” he said at the time of the donation. “If I could have started in 2014, I would look like a genius,” he said, jokingly, about Herbalife’s 2014 decline.
Fast forward to March and Ackman’s bet that Herbalife is an illegal pyramid scheme is once again a mixed bag.
After falling to a low of $27.60 a share on Jan. 7 — the very same day as his interview with USA TODAY — Herbalife’s stock is soaring back to life.
On Monday, the stock closed on Monday up $2.89, of 6.8%, to $44.99. It is up close to 20% for the year.
Ackman shorted Herbalife at around $47 a share. But he needs it to move down to the mid-30s to profit as a result of expenses tied to the investment, including legal fees.
Last week, Herbalife shares popped close to 13% after a lawsuit was tossed alleging stock losses due to misrepresentations by the multi-level marketing firm.
Herbalife shares also got a boost after it emerged that federal investigators were looking into possible market manipulation of Herbalife stock. Ackman later said that federal investigators contacted a consulting firm he hired for his campaign against the company.
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