9 December 2019
Billionaire investor William Ackman has a US$1 billion bet against Herbalife. Photo: Bloomberg
Billionaire investor William Ackman has a US$1 billion bet against Herbalife. Photo: Bloomberg

Wall Street rejects Ackman’s Herbalife ‘death blow’

Wall Street on Tuesday flatly rejected billionaire investor William Ackman’s latest accusations against Herbalife, sending the company’s stock surging 25 percent, Reuters reported.

Ackman gave a three-hour presentation before 500 people in a New York auditorium, with thousands watching the webcast, to support his claim that the California-based nutrition company is a criminal enterprise that targets minorities, counts nonexistent customers, and breaks labor laws, the report said.

However, investors appeared unconvinced. Herbalife shares rose 25 percent to US$67.77, far offsetting the losses on Monday after Ackman told CNBC he would deal a “death blow” to the company.

Trading volume in Herbalife was the heaviest since February 2013, according to the news agency.

“Unfortunately, Bill over-promised and under-delivered on this presentation,” Vijay Marolia, a fund manager at Regal Point Capital Management, told Reuters.

Herbalife’s rise on Tuesday probably triggered a chain reaction as short-sellers covered their losing bets, the report said.

In December 2012, Pershing Square Capital Management, a US$14.7 billion hedge fund headed by Ackman, unveiled a US$1 billion short bet against Herbalife, calling the company a pyramid scheme where members earn more money from recruiting than by actually selling products to end users. Herbalife has rejected the claims.

Herbalife chief financial officer John DeSimone said on Tuesday Ackman’s claims were fabricated. He added that Herbalife had commissioned a study that vindicated the company.

Despite Ackman’s allegations, Herbalife shares have almost doubled since the end of 2012. His rivals, including Carl Icahn and George Soros, have bought Herbalife shares.

– Contact us at [email protected]