Security and Exchange Commission has charged two men with insider trading in Herbalife Ltd. (NYSE:HLF) shares, according to a CNBC report by Scott Wapner. One of those charged is a former roommate of a former analyst at Bill Ackman’s Pershing Square Capital Management. It’s worth noticing that neither Bill Ackman nor the analyst have been charged by SEC of wrongdoing.
In 2012, a day before Bill Ackman announced his big short position in Herbalife Ltd. (NYSE:HLF) and made a presentation about his views on the company, the analyst told a roommate about Ackman’s plans at Herbalife Ltd. (NYSE:HLF), which in turn communicated the information to a friend. The roommate’s friend has bought put options in the aftermath and has scored gains of $47.000 on the trade, as the stock experienced increased volatility on the news and tumbled over 30% over the next days. SEC has ordered the individual to pay a civil penalty worth $47.000.
Herbalife Ltd. (NYSE:HLF) has been under intense scrutiny in the last two years from hedge fund Pershing Square Capital Management, which has amassed a big short position, alleging the company is running a Ponzi scheme. Bill Ackman, the fund’s CEO has made several presentations trying to convince investors that Herbalife Ltd. (NYSE:HLF) is a fraud, but failed. His last presentation was in fact a boon for the company’s stock, as it increased by 15% as he spoke.
Many investors have lined up against Ackman’s vision by building long positions in the stock. Notable long investors in Herbalife Ltd. (NYSE:HLF) include Carl Icahn and George Soros. Carl Icahn has a stake of 17 million shares worth slightly more than $1 billion and George Soros owns 4.7 million shares that have a market value of more than $305 million. Bill Ackman has a short position of 20 million shares.
Herbalife Ltd. (NYSE:HLF) stock is down 45% year-to-date, as its earnings results have disappointed lately.
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