Herbalife Short Interest Explodes In Last Week Of 2012

Three weeks ago, when we suggested, correctly, that Whitney Tilson's involvement in the Herbalife theater was the absolutely infallible "contrarian buy" signal, as the only logical next step was a short squeeze, we were amazed by the rapid rise in HLF short interest heading into the last reported data point, which saw total HLF shares shorted surge from 20 to some 26 million in the span of two weeks December 14. That, in itself, was sufficient grounds for us to sit back and expect some potential corporate finance transaction which saw the company buy back a portion of its stock, and with the remainder of the float held by long hands, we somewhat jokingly were expecting a Volkwsagen-like event to grip the company with shorts scrambling to cover at any price should suddenly there not be enough shares in the float to cover the shares short as a % of float which was at ~25%.

Well, over the weekend the NYSE reported the latest short interest in the stock as of December 31, or even as the stock had starting ramping higher.

To our absolute shock, dismay, and not to mention delight, the new number of shorts reported soared to a mindblowing 37.3 million shares outstanding, or 35.2% of the total float, an increase of 11 million shares in one week, or 42%!

In other words, the probability for an astronomic jump in the stock should the company indeed announce a buyback as Charlie Gasparino hinted moments ago, has just increased drastically, especially since it appears that Ackman, who is now likely underwater on his blended cost basis, has covered little if any of his bets.

To summarize: thank you Whitney Tilson for suggesting the best performing idea of 2013 so far, even if it means you may have blown up yet another fund in under 12 months.


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