As Herbalife Shorts Soar, The Squeeze Continues

Tyler Durden's picture

A week ago, on December 26, when Whitney Tilson announced he was piggybacking on the Einhorn-Ackman Herbalife trade, we asked if a short squeeze was imminent "as Tilson jumps on the Herbalife bandwagon." The stock was trading in the mid-$20s. This morning it will open just shy of $35, a 30% gain in one week, which more or less answers our rhetorical question. As a reminder, the Herbalife as a "ponzi scheme" thesis has been around since 2009 (check, not to be confused with the aforementioned Tilson's VIC) and anyone who assumes this is a valuation catalyst is very much wrong. Which is why the recent surge in the stock may just be the beginning: as was reported late last week, Short Interest in the stock has soared ever since HLF came to the forefront of newsflow to a whopping 26.22 million shares, an increase of 5 million shares short in the past week alone, and amounting to 24% short interest of the total % of shares outstanding.

Source: CapIQ

Which begs the question: with the price virtually screaming for an epic short squeeze, is management, in consultation with its recently hired financial and legal advisors, contemplating a Volkswagen like short squeeze, where it conceives a transaction whereby there are simply not enough shares in the free float to satisfy the short interest. This could be facilitated especially if the firm's institutional shareholders, chief among them Fidelity with 15% of the shares outstanding, were to pull their borrow (and one wonders just where Fidelity's fiduciary responsibility lies if it allowed Ackman to put on a 20 million share short, at least according to him, a trade that could only be enacted if Fidelity allowed him to borrow its shares to short the stock against Fidelity's long holdings), on top of a leveraged stock buyback or even MBO.

In short- could HLF, with 24% of its stock short, and where institutions control more than 76% of the shares outstanding, become the next Volkswagen squeeze play, and send the stock soaring far higher than ever before, in the process destroying Ackman (assuming he has still not covered his short), Tilson, and anyone else still short the name?

Maybe the answer to this question is just how much animosity does management harbor toward those very publicly short its stock.

We hope to find out soon enough.

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youngman's picture

This stock is toast...well toast and butter..and lots of jelly too...because a study just came out saying being overweight is

HedgeAccordingly's picture

HLF shorts toast.. Grandstanding Ackman - what about Spooz shorts? +5 percent in two sessions?

goldfish1's picture

No takedown of PM's at 8 am ET. Must have forgot to program the system.

I am a Man I am Forty's picture

I bought NUS at 33.11 for a trade.  It sold off with HLF.

Zer0head's picture

I'm still thinking bout BAC at 5

kridkrid's picture

I think you'd be dead.  At the very least, don't drive a car.

ZeroAvatar's picture

That's the problem:  Someone, somewhere, 'knows' how much short interest there is.  Someone 'knows' how many puts were purchased for HLF. 


As soon as you place your order, the Algos go to work.  It's their 'job' to steal that money from you.  YOU WILL lose that money.  If you think you have an honest chance, you're delusional.


If there's high short interest or put-buying, the 'Infinitely Wealthy' PTB will steal you blind, with their unlimited 'resources'.

tooriskytoinvest's picture

Gold and Silver Gain Along with Stocks, "Chaotic and Unsatisfactory" Fiscal Deal "Could See Another US Downgrade"

Tsar Pointless's picture

Yep. Another US downgrade. Kind of like how Barack Obama was going to institute Sharia law if he was elected in 2008.

I saw that one posted on Internet sites, too.

The "information superhighway" has become nothing but a disinformational detour.

BlueCheeseBandit's picture

We're you also denying a downgrade was possible in 2011?

Dr Benway's picture

So it will either soar on further manipulation short squeeze... or crash on the inevitability of fundamentals.. and the only way to know which it will do is if you're an insider.

Seems stupid to play either way, no?

But fuck, that applies to most stocks these days.

morning_glory's picture

Gentlemen, prepare your anuses.

LeisureSmith's picture

Indeed. Prepare your anuses or go commando, soaring shorts is the anuses sworn enemy.

monopoly's picture

Excellent post and right on. BAC at 5. Ha, it is the new go go stock. Just had an upgrade. Buy banks. I think I am going to be sick.

At least I am in the one asset with true value. 

No, I did not buy AMZN. LOL

Dr. No's picture

Simple case of Ganja mania. "Herbalife" is being confused with Mary Jane and investors want to get in on the early stages, much like the vending machine tycoons.  Trouble is, once you get in, you forget to get out.

Hobbleknee's picture

I remember my mom used Herbalife back in the 80s.

Dr. No's picture

Most use it in college but then move one...

Mercury's picture

It doesn't look like the FTC is helping much with the HLF-to-zero thesis so Ackman/Einhorn were likely covering the second that 300 slide presentation was released. So, maybe not a home run but a nice enough trade.

GMadScientist's picture

Not sure...Einhorn likes the "I'm going to fuck you and here's how I'm going to fuck you" approach; part of his "mystique".

I'm ashamed to admit that I actually like the showmanship.

ZeroAvatar's picture

GMadScientist said: "I'm going to fuck you and here's how I'm going to fuck you"


I'm having a micro-cam installed in my anyus this week...there's been so much activity back there lately I need to start filming this shit!

Mercury's picture

Well, they're probably right about the pyramid scheme but I'm not so sure that is as flat-out illegal as they try and make it sound.

Also, we're talking about a business model that is based on A) fat people and B) underemployed people.  Probably not the worst place to be right now even with the smoke and mirrors.

Dr Benway's picture

Illegality and immorality are both irrelevant in the absence of enforcement.


Is Herbalife some 'network marketing' shit? If so, all those are basically pyramid schemes with some lame product attached to disguise the pyramid. The suckers are told they will make money by recruiting others, whereby they burn family and friends.


The ones at the top make money and everyone else loses their money and friends.

GMadScientist's picture

I call it Amway for Hippies.

TooBearish's picture

hows HH doing on his long gold /short SPX ?...every one of these guys that go public with an opinion getting ass handed....

Seasmoke's picture

They are on the LA Galaxy soccer jersey = SCAM

Frastric's picture

Tilson can't be wrong... Buy the motherfucking stock if you want to make a profit then use the proceeds to buy some more gold.

adr's picture

Herbalife's real product has nothing to do with supplements and health foods. There is no way the company has the headquarters and self reported revenue it has based on selling that garbage. He real product is money laundering. There is no other way.

Herbalife is a front company for something illegal, either human trafficing or drugs through the port of LA, or shipped up the coastal highway from Mexico. Complete with US government involvement.

The company started out as a scam. The founder created a health drink in the 80s that turned out to be nothing more than a placebo, and even at some point poisonous. The product today is complete bullshit sold through a MLM apparatus with "distributors" who take all risk of inventory. It even sounds like the illegal drug trade.

When the illegal traffickers look for a shell corporation, they try fo find dishonest people who would probably be in jail otherwise. If you steal a few million dollars, you'll probably be in jail for a long time. You create a multi billion dollar tock fraud, making yourself a billionaire in the process, you'll get a slap on the wrist. Invest accordingly.

If you think this is a crazy conspiracy theory, you don't know business today.

fajensen's picture

When the illegal traffickers look for a shell corporation, they try fo find dishonest people who would probably be in jail otherwise.

Why would they: CityBank, Wachovia, e.t.c. can launder way more money than Herbalife ever coul and, being banks, nobody will ever go to jail!

Damage360's picture

LOL at these headlines. The only sure thing on wall st is fading Zerohedge equity calls

Jugdish's picture

If I diarrhea into a bottle and screw a dropper on top of it and put a sticker that says " Naturale " on it an sell it, does that make it organic? Does that make my company a good company?