Bloomberg — Pershing Square billionaire Bill Ackman has abandoned his bet against stocks – the short selling – from Herbalife for almost six years, but he considered Thursday’s record fall (15) a victory.
Shares of the company that sells weight-loss shakes and vitamins plunged 32% to a 14-year low after a quarterly earnings report that fell short of analysts’ expectations.
Over the past six months, Herbalife (HLF) shares have lost nearly 50% of their value, helping short sellers – the short sellers – to accumulate potential earnings of almost US$68 million, according to data from S3 Partners.
“It’s a very good day for my psychological bet against Herbalife,” Ackman said in a post on X (formerly Twitter). “And it’s an even better day for the world to see one of the biggest pyramid schemes fail.”
Herbalife did not respond to Bloomberg News’ requests for comment on Ackman’s allegations.
The activist investor’s statements are nothing new. He fought a five-year battle after filing a $1 billion bet against Herbalife in 2012, claiming the company that sells weight-loss shakes and vitamins was actually an illegal pyramid scheme.
He held his position as the stock rose and faced billionaire investor Carl Icahn, who became the company’s largest shareholder. Ackman unwound most of his short position in 2018, and Icahn also eventually lost interest, exiting his stake in 2021.
The past few years have been more turbulent for Herbalife, which came under pressure after a pandemic-era rally. The number of distributors was affected as people returned to work after Covid lockdowns, hurting sales growth. At the same time, macroeconomic pressures such as inflation and exchange rates are also weighing on Herbalife’s earnings.
The company has also been working to reduce debt, at the expense of share buybacks.
“The fact that they are not doing large share buybacks is definitely weighing on the price,” said the analyst at Bloomberg Intelligence Diana Rosero-Pena.
Wall Street is largely neutral on the company, with two analysts giving a buy rating, four saying a hold and one recommending a sell. Analysts’ average price target of $13.60 represents more than 65% upside from Thursday’s closing price. Shares rose 0.5% on Friday (16).
“Under typical conditions, you would expect the stock to fall 15% to 20%, no more than 30%,” said Linda Bolton Weiser, an analyst at DA Davidson, who has a neutral-equivalent recommendation on Herbalife. “In terms of negotiation, it seemed a bit extreme.”
See more at Bloomberg.com
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