Bloomberg News

Ackman Says Herbalife Bet Carries Bigger Potential Gain

February 13, 2014

Herbalife

Herbalife Ltd. signage is displayed outside of Herbalife Plaza in Torrance, California. Photographer: Patrick T. Fallon/Bloomberg

Bill Ackman, the billionaire hedge fund manager who says Herbalife Ltd. (HLF:US) is an illegal pyramid scheme, says he now stands to gain more from the nutrition company’s demise than when he started.

“We actually now have a much larger position notionally than we had initially,” Ackman said yesterday at the Harbor Investment Conference in New York. “If it were to disappear tomorrow, we’d make a lot more than had it just blown up the day after I gave my last presentation.”

Ackman, who said in November that his New York-based Pershing Square Capital Management LP had lost as much as $500 million on the investment, declined to update how much he has made or lost on the position. He also didn’t detail the current structure of his bet, which started when Pershing Square sold short more than 20 million of Herbalife’s shares in 2012. Last year, he reduced the equity short position in the company while maintaining his bet through long-term put options.

Ackman also said yesterday he believes Herbalife’s recent decision to sell $1 billion of convertible bonds came after it couldn’t get a traditional bank loan.

“They couldn’t sell a bond to a conventional institutional investor,” he said. “I don’t think they could get a bank to loan them money.”

Air Products

Herbalife, which makes vitamins, skin creams and meal-replacement shakes and operates in more than 80 countries, has denied Ackman’s claim. Barb Henderson, an Herbalife spokeswoman, declined to comment.

Answering questions from conference attendees, Ackman also predicted Air Products & Chemicals Inc., the industrial gas producer he targeted last year, will climb to more than $200 a share after new management is installed, and said there is still “meaningful upside” in General Growth Properties Inc., after Pershing disclosed it had sold its stake this week.

The initial buyers of Herbalife’s notes, due in 2019, will be Bank of America (BAC:US) Corp., Credit Suisse Group AG, HSBC Holdings Plc (HSBA) and Morgan Stanley (MS:US), Herbalife said Feb. 3. The notes can be profitably converted to shares if the stock rises at least 25 percent.

Herbalife rose 2 percent to $66.90 at the close in New York. The shares have declined 15 percent this year. Herbalife shares more than doubled in 2013, and investors, including billionaire Carl Icahn, backed the Cayman Islands-based company.

To contact the reporters on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • HLF
    (Herbalife Ltd)
    • $64.49 USD
    • -0.50
    • -0.78%
  • BAC
    (Bank of America Corp)
    • $15.38 USD
    • -0.06
    • -0.39%
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