It would be tragic if it wasn't so hilarious. Nearly a year after we first suggested that Herbalife is the long of 2013, as a result of the epic short squeeze potential resulting from the Ackman announcement of his mega short,(promptly followed by the traditional Whitney Tilson piggyback) which it has been, rising from $25 to an all time high of $77.39 days ago, Herbalife has had enough of the so-called retail expert's (coughJCPcough) repeated allegations of fraud, and after taking a well-deserved victory lap costing Ackman hundreds of millions, has decided to hit him where it truly hurts - his clients. Bloomberg reports that Herbalife is approaching investors in Ackman’s hedge fund, suggesting they pull their money from the $12 billion firm.
Herbalife’s argument: Ackman’s bet, which has lost as much as $500 million, is risky and irresponsible, said the people, asking not to be named because the campaign is private." This is sheer brilliance on behalf of HLF, and one can't wait to see just how successful the Moelis-run campaign concludes, because if there is one thing massively overinflated Wall Street egos (in this case belonging to epically overvalued "investment managers" - just ask Icahn) can't stand, it is a drain of AUM. It would also mark a historic first time that a company marked for a shorting death strikes back at the hedge fund itself.
More from Bloomberg:
Moelis & Co., an investment bank working for Herbalife, arranged a meeting with Cliffwater LLC, which advises clients on hedge-fund investments, and Herbalife executives, according to two people with knowledge of the gathering. Moelis also reached out to New Jersey’s $76.7 billion pension fund, which has $207 million invested with Ackman, said the people. Executives of the New Jersey fund haven’t met with the Herbalife camp.
“Herbalife and Ackman have been fighting in one theater, and now the warfare has moved into an additional theater,” said John Coffee, professor of securities law at Columbia University in New York. “All’s fair in love and activism,” he said, adding that the tactic of putting pressure on activist investors through their clients is a new one.
Ackman, using chart-filled presentations with more than 300 pages, has waged a public campaign accusing Herbalife of generating most of its revenue from recruiting new distributors, rather than through sales to consumers. He’s urging U.S. regulators, elected officials and community activists to help shut it down. Even after the shares surged, the hedge-fund manager said in a November interview on Bloomberg Television that he “will take this to the end of the earth.”
He sure will. And speaking of Ackman's presentation, this is what Whitney Tilson said about it last year, when he piggybacked on the losing trade:
Merry Christmas to all!
Pershing Square’s analysis of Herbalife is the most remarkable piece of investment analysis I have ever seen. Simply astonishing. And kudos to Pershing Square for making all of it public – not just the 300+ page slide presentation, but all the supporting materials. For the many young people on this email list who are looking for a job in this industry, study this carefully – if you can do analysis even a tiny fraction this comprehensive, there will always be a job for you...
Yup - with Whitney Tilson... where you may have to pay an "inverse Christmas Bonus" to keep your job.
The stated, politically-correct reason for the intervention is clear:
Herbalife and Moelis are trying to persuade Pershing Square investors and advisers such as Cliffwater that Ackman is acting irresponsibly and made the wager a personal issue, said this person. They argue that, by putting almost 10 percent of client assets into a short position against Herbalife, he was taking too much risk, the person said.
Still, none of this will compare to the sheer, epic humor that will result if and when Carl Icahn joins in, say, by telling every Pershing Square investor he would match every dollar pulled out with 50 cents of his own money. After all, for the 70+ year old billionaire it's all a game at this point...