The Activist and Herbalife: Just Maybe Ackman’s Right (The New York Times)
Bill Ackman, the activist investor, has been painted as a loser in his yearslong quest to shut down Herbalife, the nutritional supplement company that he bet against, contending it defrauded customers and was a pyramid scheme. Two weeks ago, Herbalife paid $200 million to settle a case brought by the Federal Trade Commission. Herbalife’s stock rose after the settlement, which showed that investors took the development as little more than a slap on the wrist. On Wall Street, Mr. Ackman’s rivals snickered. The headlines have been withering: “Herbalife Settles Pyramid Scheme Case With Regulator, in Blow to Pershing’s Ackman,” Reuters wrote. “Herbalife Scores Huge Victory in Its Bill Ackman Battle With F.T.C. Settlement,” Forbes said. And on and on.
Einhorn Insurer Shifts to Mortgage Bet After Florida Fraud Costs (Bloomberg)
David Einhorn’s Greenlight Capital Re Ltd., the reinsurer seeking to reverse underwriting losses, is pushing into the mortgage-guaranty market after being burned by fraudulent claims on property policies in Florida. Greenlight Re has been struggling to find profitable insurance underwriting opportunities after Einhorn formed the company partly as vehicle to generate capital that he can invest through his hedge fund strategies. The Cayman Islands-based firm declined the most since October in New York trading Tuesday after posting its fifth quarterly loss in six periods. The reinsurer is exiting money-losing forays into construction-defect coverage and commercial-vehicle policies while scaling back in Florida.
Och-Ziff Doubles Reserve to $414 Million to Settle Probe (Bloomberg)
Och-Ziff Capital Management Group LLC, the hedge fund firm run by Daniel Och, more than doubled the money it’s setting aside for a settlement with U.S. authorities and is in talks to raise capital from partners to help cover the cost. Shares rallied. The firm reserved $214.3 million for the probe in the second quarter, bringing the total for the anticipated settlement to $414.3 million, the company said Tuesday in a statement. Chief Financial Officer Joel Frank said on a conference call today that settlement talks with the government are in advanced stages. The company founded by Och, 55, has been in the cross hairs of investigators for at least five years over whether it knowingly paid bribes to get an investment from Libya’s sovereign wealth fund and to participate in deals elsewhere in Africa.