Billionaire activist investor Bill Ackman is taking a moral stand against sugar soft drinks like Coca-Cola and Pepsi. The head of Pershing Square Capital Management spoke out about how such drinks have contributed to world health problems. But some might think that this is nothing more than a setup for another Herbalife situation.
The interesting thing here is that Israel’s new Finance Minister Bezalel Smotrich just reversed his predecessor’s policy and rescinded a sin tax on sugar drinks like Coke and Pepsi. Israel’s previous government wanted to limit the consumption of drinks with added sugars because of how fattening they are and because they are a major factor in the increasing rates of obesity and type 2 Diabetes around the world. But Israel’s ultra-orthodox community – which now has a large block in the country’s new coalition government – complained about the tax because they like to give their children such drinks as a treat on Shabbat and holidays and so they pushed for its repeal.
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So, what exactly did Bill Ackman say anyway?
Well, Bill Ackman tweeted, “Coca-Cola and PepsiCo have caused more harm to global health than likely any other company. Just look at the correlation between diabetes/obesity and soft drink consumption. It is remarkable that the plaintiffs’ bar has not yet won a massive judgment against them. “
So, did Bill Ackman do this because he has a financial interest in the matter? Well, he says no.
Ackman also tweeted, “No, I don’t have any economic interest, long or short, in any soft drink company.”
This denial was necessitated by Ackman’s infamous failed attempt to short the stock of diet company Herbalife. He had called the company a fraud and said that its stock was way over valued, which is why he tried to short the stock. But a short only works if a company’s stock falls. Well, Bill Ackman’s nemesis Carl Icahn stepped in and came to Herbalife’s rescue and the stock went up and Ackman lost about $1 billion.
And Bill Ackman did imply that Coke and Pepsi are overvalued saying, “In reality, neither company is as profitable as their public filings suggest because the real costs, if they were properly burdened with their negative externalities, are much, much higher than reported.”
Even if he himself is not making a play here, Bill Ackman’s comments could still lead to a drop in Coke and Pepsi stocks because whenever a player like Bill Ackman talks, people listen.
