21.7 C
Washington

Bill Ackman claims delayed victory over Herbalife after stock’s 32% plunge to 14-year low: ‘A very good day for my psychological short’

Date:

Share:



Pershing Square’s Bill Ackman folded on his short bet against Herbalife Ltd nearly six years ago but he’s calling Thursday’s record tumble a win.

The stock of the weight-loss shakes and vitamins seller plunged 32% to a 14-year low, after a quarterly earnings report that fell short of analyst expectations. In the last six months, shares have shed nearly 50% of their value, helping short sellers amass paper profits of nearly $68 million, according to data from S3 Partners LLC. 

“It is a very good day for my psychological short on Herbalife,” Ackman said in a post on X. “And it is an even better day for the world to see one of the biggest pyramid schemes fail.”

Herbalife didn’t respond to requests seeking comment on Ackman’s allegations. 

The activist investor’s assertions are nothing new. He was locked in a five-year battle after opening a $1 billion bet against Herbalife in 2012, claiming that the seller of weight-loss shares and vitamins was an illegal pyramid scheme. 

He held onto the position as shares marched higher and went head-to-head with billionaire investor Carl Icahn, who became the company’s largest shareholder. Ackman unwound most of his short position in 2018, Icahn too eventually lost interest exiting his stake in 2021.

The last few years have been rockier for Herbalife, which has come under pressure after a pandemic-era rally. Distributor numbers have taken a hit as people reentered the workforce after Covid lockdowns, weighing on sales growth. At the same time, macroeconomic pressures such as inflation and foreign exchange rates are also dragging on Herbalife earnings. 

The company has also been working to reduce its debt balance, at the expense of share repurchases. 

“The fact that they’re not doing sizable share buybacks is definitely weighing on price,” said Bloomberg Intelligence analyst Diana Rosero-Pena. 

Wall Street is largely neutral on the company, with two analysts giving it a buy rating, four saying to hold and one recommending sell. The average analyst price target of $13.60 represents more than 65% upside from Thursday’s closing price.

“Under typical conditions, you’d expect the stock to be down 15% to 20%, not more than 30%,” said Linda Bolton Weiser, a D.A. Davidson analyst who rates Herbalife neutral. “On a trading basis it seemed like a little bit of an overreaction.”

Subscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up for free.



Source link

Subscribe to our magazine

━ more like this

The best Kindle deals available for Amazon Prime Day 2024

It’s no secret that Amazon sells some of the most popular e-readers on the market. Every Kindle I’ve ever tested has been snappy...

You can now tap your retirement account for a $1,000 emergency. But be careful

Between the soaring cost of living and sky-high interest rates, average Americans are strapped for cash, making it difficult to save for emergencies—or...

How to Embrace the Glorious Mess of Everyday Life – Tiny Buddha

“Embrace the glorious mess that you are.” ~Elizabeth Gilbert Let’s begin with a simple fact: life is inherently messy. Despite our best efforts to...

The Philadelphia Airport just recorded snowfall–in July

Las Vegas hit record highs of 120 degrees earlier this month and areas along the east coast are currently under extreme heat warnings,...

Mortgage prequalification vs. preapproval: Which is best?

Getting prequalified or preapproved for a mortgage can be two important steps when you want to buy a home. You’ll find out approximately...