Daniel Loeb’s Third Point LLC took an 8.2 percent stake in Herbalife Ltd., becoming the latest firm to bet against hedge fund manager Bill Ackman, who has accused the direct seller of nutrition shakes of being a pyramid scheme.
Third Point, which had about $10 billion under management as of Dec. 31, has purchased 8.9 million Herbalife shares, according to a filing with the U.S. Securities and Exchange Commission today.
Herbalife is fighting allegations made by Pershing Square Capital Management LP founder Ackman that it uses inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme. Herbalife is preparing to lay out its rebuttal at an investor conference in New York tomorrow.
Loeb’s investment “sounds incredibly wise to us,” Tim Ramey, an analyst with D.A. Davidson & Co., said while traveling in New York, where he plans to attend the Herbalife meeting tomorrow. “The Ackman case doesn’t have any merit. It attempts to prove the company’s a pyramid scheme when the prima facie evidence is that it’s not.”
Ramey recommends buying the stock.
Herbalife rose 4 percent to $39.90 at 2:16 p.m. in New York after earlier surging as much as 9.3 percent.
Barb Henderson, an Herbalife spokeswoman, declined to comment on the Third Point investment. Loeb didn’t immediately respond to an e-mail seeking details.
Herbalife Spotlight
Ackman, who has sold short about 20 million Herbalife shares, said today in a statement that his goal was “to shine a spotlight on the company so that the world better understands the facts about Herbalife.”
“The outcome of this investment is not about Pershing Square or anyone else who is long or short the stock,” Ackman, Pershing Square’s chief executive officer, said in the e-mailed statement. “To the extent another investor, long or short, brings additional sunlight to the situation, we welcome them.”
Short selling refers to the practice of borrowing shares and selling them, with the goal of profiting by repurchasing them later at a lower price.
Loeb, like Ackman, is an activist investor who buys stakes in company’s and then advocates for changes to boost a company’s value. Early last year, Loeb pushed for an overhaul of Yahoo! Inc. after saying the Web portal was mismanaged. The internet company revamped its board and in May said Chief Executive Officer Scott Thompson had stepped down after failing to correct errors in his credentials.
Third Point Takes 8.2% Stake in Herbalife
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Third Point Takes 8.2% Stake in Herbalife
