Monday, January 21, 2013
Hedge fund mogul at risk of a short squeeze on Herbalife
Found via the
Corner of Berkshire & Fairfax
Hedge fund titan Bill Ackman had an easy time vanquishing the sclerotic board of Canadian Pacific Railway last year.
He’s now in an even more fascinating bare-knuckles fight, this time with Herbalife Ltd., the big U.S. direct marketer of weight loss products. Mr. Ackman claims the company is a pyramid scheme, and is shorting $1-billion (U.S.) worth of its stock.
We’re used to seeing larger-than-life market players like Mr. Ackman win against adversaries. It isn’t often that one of them steps on a banana peel, but at Herbalife, we might see a case of a famed hedge fund manager in a rare slip.
At this point, a profit on his massive Herbalife position is far from certain. The big risk: A dreaded and rare event on the stock market known as a short squeeze. For all of us in the cheap seats, the outcome will be fun to watch. The situation is already drawing in other well known hedge fund managers, such as Carl Icahn and Daniel Loeb, who would be delighted to burnish their own reputations at Mr. Ackman’s expense.