Hedgefund CEO Carl Icahn confirmed Thursday, February 14, that he bought 12.98 percent of supplement company Herbalife, and long-term rival Bill Ackman is betting against it.
After Icahn bought the stock, it rose 27.7 percent, which is a few dollars bellow the 50-dollar average price that Ackman bet against the stock on.
In his own defense, Icahn said he’s conducted “significant analysis,” and “concluded that the company has a legitimate business model with favorable long term opportunities for growth.”
Herbalife says that Ackman’s claims are bogus, and that the company has received backing from other hedgefund managers, one of which is Dan Loeb, who has an 8.2 percent stake in the company. A spokesperson for the company further added: “We welcome all parties who see that same value in Herbalife that we do.”
Robert Chapman, who was one of the initial investors in Herbalife, told the NY Post that he sold his entire stake in the company on Thursday and Friday, after Icahn revealed that he bought the stock. “This is a boxing match, and you always want to be on the guy who just got punched,” the Los Angeles CEO said, in reference to Ackman.
Mr. later added that while he still believes in Herbalife, the shares- which have jumped between 46 dollars and twenty-six dollars over the past two months- will come under pressure when regulars start investigating the company, which he believes is highly likely.
“I expect that the claim will attract the attention of regulators some day, and I do not want to be long the day before a significant regular has commenced an investigation of the company. That being said, I am extremely confident that the results of any such probe will be benign and will indicate Herbalife,” Chapman noted.
Meanwhile, the rivalry between Ackman and Icahn shows no signs of stopping. It stems from a decade long real estate investment battle, and has become a media riot over the past couple of month. Two weeks ago, the two had a feud on live TV, where Icahn said that “everybody calls back the stock that you borrowed, if that happens the stock goes to 100 dollars.”
In response, Ackman said: “Carl is free to make a tender offer for the company… go ahead and bid for the company.”