Herbalife v. Ackman: Who’s manipulating whom?

May 6, 2015

It’s been nearly 2 1/2 years since Pershing Square’s Bill Ackman made a 300-page presentation outlining his short position in Herbalife. Since then, countless pixels (not to mention video footage and actual ink) has been devoted to the seemingly never-ending battle, complete with dueling websites (see this company site and this anti-Herbalife site).

Here at footnoted, we haven’t really spent too much time on the back-and-forth volleying. Still, a disclosure in the 10-Q that Herbalife filed yesterday afternoon — the same day it reported better-than-expected results that are causing the stock to surge today — caught our attention. Although the disclosure didn’t mention Ackman by name, it’s hard to imagine who else the company could be talking about. Here’s a snip:

“Since late 2012, a short seller has made and continues to make allegations regarding the Company and its network marketing program. The Company believes these allegations are without merit and is vigorously defending itself against such claims, including proactively reaching out to governmental authorities about what the Company believes is manipulative activity with respect to its securities.”

While the company has previously disclosed that it had reached out to regulators, the language about manipulative activity is a new one.

A month ago, in this statement made to CNBC, Herbalife spokesman Alan Hoffman said “There is reportedly an ongoing federal criminal investigation into his (Ackman’s) campaign against Herbalife for stock manipulation” at the same time it disclosed that the company was being targeted by federal regulators.

In yesterday’s filing, the company disclosed that in addition to the SEC and the Federal Trade Commission, the Department of Justice had also “recently sought information” from the company.

What’s interesting here is that a company that has been accused of being manipulative has actually turned the tables and said that their primary accuser is actually the one doing the manipulation. More pixels to come!

 

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Companies Mentioned: Herbalife Ltd.,
1 Replies to "Herbalife v. Ackman: Who’s manipulating whom?"
  1. George Acs writes:
    May 7, 2015

    I have a relatively recent long position in Herbalife. I am almost always a covered option trader, but this particular lot is not covered at the moment, although I do attempt to capitalize on near term moves with short term duration contract sales.

    I have been fascinated by this case, but the manipulation issue is is troubling, regardless of which side may be engaged in such activities.

    As a long, I understand the value of short sellers (and am frequently short calls or puts), but I do have concern when seeing a deluge of published articles, with bombastic titles, that clearly seek to change sentiment. – a nice way of saying “manipulate.”

    Seeing a single author, with no known ties to Pershing/Ackman, publish 95 highly critical Herbalife articles in a single year, is as manipulative as it may get, at least if the individual investor is the target. Of course, if there is some kind of relationship between this and other prolific authors with Pershing/Ackman, that takes the troubling aspect to greater heights.

    Today’s article, entitled: “FTC: There’s Never Been A Better Time To Arrest Herbalife,” can only give the impression that the FTC has made some statement regarding the timeliness of arresting Herbalife. ( http://seekingalpha.com/article/3152946-ftc-theres-never-been-a-better-time-to-arrest-herbalife

    Arresting Herbalife????

    Of course, there is nothing in the article to suggest that the FTC has made any adverse comment or taken any adverse action with regard to the company.

    I don’t follow the slew of allegations that may go back and forth, but if Herbalife is involved in manipulation that is distinctly different from what embattled CEOs may do to support their share price, then it too is following a very troubling path that should shake the confidence of any investor

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