Hedge fund investor Bill Ackman placed a billion dollar short bet on nutrition supplement maker Herbalife. Ackman just didn’t bet on the failure of Herbalife, he has been actively seeking to make it happen in order to profit from his short bet on their stock. Since then, investor Carl Icahn of Icahn Enterprises has placed his bet on the success of Herbalife, purchasing about $100 in shares of Herbalife stock, comprising a 23.1 percent stake in the company. Icahn is winning big on his bet on Herbalife.
There is a reason why Icahn is winning the battle over Herbalife with Ackman: he is investing his money in helping this company to succeed, which is a better investment strategy than that of Ackman, who is attempting to use the power of government to cause Herbalife to go into bankruptcy for the purposes of succeeding in his billion dollar short bet.
Carl Icahn founded his firm, Icahn Enterprises, to make investment and profit from successful and start up corporations. He has been a successful investor. Forbes estimates that Icahn’s net worth is about $16.3 billion, and also reports that Icahn has an important friend “Donald Trump in the White House” and “Icahn now has an insider’s role … advising the Trump Administration on issues involving regulatory overhaul, helping to select the heads of key regulatory agencies like the Securities & Exchange Commission and the Environmental Protection Agency.”
Ackman is fighting a losing battle over Herbalife, solely for the purpose of destroying the company to profit from his short bet. As reported by Forbes, Ackman is not quite as successful as Icahn and Ackman’s net worth is $1.4 billion. Forbes noted that the downfall of Ackman’s hedge fund as the collapse of Valeant Pharmaceuticals continued to take a toll on Bill Ackman’s Pershing Square hedge fund firm, which saw significant asset outflows and another down year in 2016. Ackman’s main fund, Pershing Square International, fell 10.2% in 2016, while his publicly traded Pershing Square Holdings saw NAV drop 13.5%.”
It is widely acknowledged that Ackman is about to fall out billionaire club status due to the substantial losses caused by his quixotic war on Herbalife, and making bad bets on other companies, such as his disastrous investment in Valeant Pharmaceuticals. Ackman is expected to take a giant hit when his short bet on Herbalife fails.
Ackman’s war on Herbalife has been centered largely around false allegations the company is a pyramid scheme built largely on multi-level marketing. He alleges that the company was artificially propped up by orders filled by distributors rather than sales of products to end users, have proven false. The company just recently reported that 90% of U.S. sales in May of 2017 were end use customers, not distributors. Herbalife had agreed to an 80% of sales to end use customers when they signed an agreement with the Federal Trade Commission (FTC) last year.
Herbalife is winning against Ackman’s attack because it has proven to be legitimate company that sells nutritional supplement products that consumers demand. Betting on the success of a company like Herbalife is a key reason why Icahn is building great wealth while Ackman is falling from billionaire status to mere multi-millionaire standing. Carl Icahn is on the right side of this battle helping to make Herbalife a great company again.