The Joplin Globe, Joplin, MO

Business

Discussion

February 15, 2013

Herbalife stock surges after Icahn grabs stake

From The Associated Press

NEW YORK — Strictly business, nothing personal. That’s how Carl Icahn characterizes the latest turn in his clash with fellow Wall Street titan William Ackman.

Both men have a keen interest in Herbalife, a maker of dietary supplements designed to promote weight loss. Ackman claims the company is a fraud and has bet that its stock price will crumble; Icahn says it’s a great buy.

They can’t both be right, and for now it’s not clear which one is. Icahn, for his part, disclosed in a regulatory filing late Thursday that he had accumulated a 13 percent stake in the company, essentially betting that Ackman is dead wrong. Icahn says he’s not making his bet merely to spite Ackman.

“I’m doing this to make money, that’s what I do,” Icahn said in a telephone interview with CNBC Friday. “The fact that I don’t like Ackman is, you could say, the strawberry on the ice cream.”

Icahn was speaking on the same CNBC show on which he and Ackman had a shouting match three weeks ago over Herbalife and other topics that became the talk of Wall Street.

Herbalife’s stock jumped $1.97 to $40.24 following the disclosure of Icahn’s stake as investors bet that the financier might be right in his positive assessment of the company.  

A surge in Herbalife stock would be disastrous for investors who have taken a “short” position in the company. Selling a stock short is a tactic in which an investor borrows shares in a company from a broker and then immediately sells them on the open market. The investor anticipates that the stock price will fall, allowing him or her to buy back the stock at a lower price in the future. The investor then returns the borrowed shares to the broker, pocketing the difference.

If stock rises instead, however, the investor will be forced to buy it back at a higher price than what he or she sold it for, resulting in a loss.

Icahn said he sees “great value” in Herbalife and that Ackman had created an opportunity for him by pushing down the stock price. Herbalife slumped as low as $26.06 in December after Ackman said he was shorting the stock.

Ackman remained firm in his beliefs about Herbalife.

“After 18 months of due diligence, we have concluded that it is a certainty that Herbalife is a pyramid scheme,” Ackman said in an emailed statement. “Our goal was to shine a spotlight on Herbalife. To the extent that Mr. Icahn is helping achieve this objective, we welcome his involvement.”

The feud between Icahn and Ackman began a decade ago over a real estate company deal that ended up in court. Icahn was forced to pay $4.5 billion to Ackman’s firm, and he has never forgotten about it.

“Ackman and I have had a dispute, we’ve aired it. I don’t want to get back into it.” Icahn told CNBC.  

Icahn says that he neither likes nor respects Ackman and didn’t like how he had approached his short position in Herbalife. He has previously refused to comment on whether he held a position in Herbalife. Many have speculated that he would take a stake in the company to strike at Ackman.

Where does Herbalife stand in all of this? “We welcome all parties who see the same value in Herbalife that we do,” a company spokeswoman said in an emailed statement.

Herbalife shares have been extremely volatile over the last year. Greenlight Capital’s David Einhorn, another prominent Wall Street figure, raised concerns about the company’s business in May. The stock dropped sharply after Ackman made his negative case about the company in a presentation in December.

The company has disputed Ackman’s statements, saying that he is attacking it solely to benefit his short position in the company’s stock. Herbalife executives called a meeting with analysts and investors in January to detail how its business operates and who its customers are.

Ackman replied that Herbalife “distorted, mischaracterized, and outright ignored large portions” of his presentation.

 

Text Only
Business
  • Business Asia stocks extend losses after big sell-off

    Asian stocks continued to retreat Friday after being routed the day before by unexpectedly weak Chinese manufacturing and fears the Federal Reserve will start withdrawing its monetary stimulus.

    May 24, 2013 1 Photo

  • Why worry? Less aid by Fed would point to recovery

    Investors have grown nervous that the Federal Reserve will scale back its efforts to boost the U.S. economy sooner than many expected.

    May 24, 2013

  • Procter & Gamble brings back A.G. Lafley as CEO

    Procter & Gamble Co. is bringing back its former CEO, as the world’s largest consumer-products maker tries to spur global growth.

    May 24, 2013

  • Sears reports bigger-than-expected 1Q loss

    Sears Holdings Corp. reported a steeper-than-expected loss for its first quarter with the beleaguered retailer blaming a cooler spring for falling sales.

    May 24, 2013

  • Between economy and trouble, Obama approval steady

    The economy is recovering, the White House is dealing with multiple controversies, and President Barack Obama appears generally unaffected either way.

    May 23, 2013

  • Ammonia leak at Kan. plant sends 7 to hospital

    Seven people have been released from an Emporia hospital after an ammonia leak at the city’s Tyson Foods plant.

    May 23, 2013

  • Other companies challenging contraception mandate

    Hobby Lobby Stores Inc. is challenging the part of the federal health care law that requires for-profit companies to offer employees health coverage that includes products the business owners find morally objectionable, such as certain types of contraception.

    May 23, 2013

  • Business Stocks mixed as investors reassess Fed worries

    Investors recovered their poise by midday Thursday after an early sell-off sent stocks sharply lower.

    May 23, 2013 1 Photo

  • Birth control coverage up for federal appeal

    In the most prominent challenge of its kind, Hobby Lobby Stores Inc. is asking a federal appeals court Thursday for an exemption from part of the federal health care law that requires it to offer employees health coverage that includes access to the morning-after pill.

    May 23, 2013

  • Stricken Japan nuke plant struggles to keep staff

    Keeping the meltdown-stricken Fukushima nuclear plant in northeastern Japan in stable condition requires a cast of thousands. Increasingly the plant’s operator is struggling to find enough workers, a trend that many expect to worsen and hamper progress in the decades-long effort to safely decommission it.

    May 23, 2013