William Ackman’s latest attack on Herbalife sent shares of the nutritional supplements company soaring and cost his investors several billion dollars. But the Pershing Square Capital Management founder isn’t giving up his fight with the company, which he has branded a pyramid scheme.
Herbalife shares jumped 25% yesterday after Ackman’s promised “deathblow” proved to be anything but. But the hedge fund manager, who has had a $1 billion short against the company since late 2012, said he suspects the rally is artificial.
“The company is pulling out all the stops today,” he said at the presentation yesterday. “When there is really bad news like this, they will use all of the remaining fire power to buy back the stock to blunt the accusations.”
“If I were the SEC, I would take a very close look at the timing of Herbalife’s buyback program and how they’re spending that money. You can only prop up a stock for so long.”Jo
Herbalife shares are now up 60% since Ackman announced his short, saddling Pershing Square—which is doing very well otherwise—with hundreds of millions in losses. His latest attack could burden the hedge fund with something else: a lawsuit.
Herbalife CFO John Desimone suggested litigation was possible in an interview with Bloomberg Television.
“That’s on the table, that’s an option,” he said of filing suit. “I think our case gets stronger every day.”
Ackman, perhaps sensing a chance to obtain non-public information as part of discovery, welcomed a potential lawsuit: “Bring it on,” he said.
While Ackman is sticking by his guns on Herbalife, he was forced to retract one thing he said yesterday about former D.A. Davidson analyst Tim Ramey, one of his chief antagonists on Herbalife. Ackman suggested that Ramey may have been fired when he left the firm six months ago to join Post Foods.
“I received an e-mail from Tim Ramey complaining about a statement I made in the presentation that suggested that he might have been fired by D.A. Davidson,” Ackman told CNBC. “Tim has told me he was not fired. Please make sure to correct the record.”
“Exposing one lie is the same as exposing 1,000 lies,” Ramey said. “He can’t discern the difference anymore between truth and his fictional view of events.”