One week ago, there wasn’t an investor in the world – aside from Bill Ackman – who could have foretold the momentous decline that Herbalife Ltd. (NYSE:HLF) has experienced. Shares of the nutritional supplement company are down 24.8% (and falling) on the news that Ackman, a manager of the hedge fund Pershing Square Capital, has announced he has a substantial short position on his book.
Though he does not hold put options on the stock, which was indirectly suggested by Herbalife CEO Michael Johnson, Ackman is within the realm of legality to disclose his position. When talking about just how bearish he was on Herbalife Ltd. (NYSE:HLF) on Bloomberg Television yesterday, the fund manager mentioned the following: “It is enormous. It is over 20 million shares…We are short over 20 million shares.”
Assuming he established the position in late May, this position was worth somewhere in the range of $900 million, meaning that the recent selloff has netted Ackman a profit of at least $250 million, with high estimates near $300 million. Now, consider these figures, and then realize that Herbalife’s entire market capitalization is near $3.5 billion. Wow.
On Bloomberg TV, Ackman described how many have incorrectly claimed that his “pyramid scheme” accusations are only aimed at manipulating the stock. To prove that he frankly doesn’t care about profiting from his position, he even mentioned that he would donate his own profits to charity.
Continue reading to see just what he said..