Bill Ackman has been on an Ahab-like quest to harpoon the White Whale that is Herbalife, but Herbalife is striking back with a lawsuit against the activist investor, and claims he is guilty of stock manipulation, as reported by Insider Monkey.
Ackman, who holds a significant short position against the company, has been claiming it is a pyramid scheme and is highlighting comments of former executives who admit they are unhappy with the company’s business model. Ackman claims that the company’s purpose is to make sellers its consumers, and that it is an unethical company. Fox Business reporter, Charlie Gasparino says Herbalife is filing stock manipulation charges against Ackman. Herbalife claims that Ackman is slandering the company only to expand his $1 billion short position. Meanwhile, the amount of time the company has spent trying to improve its image as a result of the schmear campaign is interfering with the operation of the company. Herbalife management is upset that Ackman canceled a meeting at the last minute to air out the bad feelings on both sides and come to a resolution.
Gasparino is not optimistic that Herbalife’s efforts will bear fruit, “People for years said Steve Cohen was guilty of stock manipulation and things of that nature, but they never got him. These cases are difficult to make, and regulators like shorts. They think (a short position) is a kind of hedge on the market.”
If Herbalife’s stock is falling amid Ackman’s attacks, why do Carl Ichan and Bill Stiritz still hold long positions, asks Benzinga? Duane Stanford of Bloomberg explains that, “From what we know Stiritz is still holding onto his shares, ” because he believes in the long-term health and wellness theme. Stanford thinks it is possible Stiritz could lose a few hundred million dollars in Herbalife if the stock continues to go south. Carl Icahn has five board seats, added Stanford, so he won’t be able to just dump shares without people knowing right away.