Herbalife Soars As Icahn Goes Medieval On Ackman, Reports 12.98% Stake In The Company

Remember when Bill Ackman told Icahn on CNBC he should tender for the company (to a less than favorable reply)? Well, Icahn may have done just that: moments ago the belligerent billionaire just reported a 12.98% stake in Herbalife, adding that he intends “to have discussions with management of the Issuer regarding the business and strategic alternatives to enhance shareholder value, such as a recapitalization or a going-private transaction.” Needless to say, the stock soars, and it remains to be seen if the epic short squeeze that we predicted, and that Icahn confirmed on TV could happen if there is not enough float to satisfy all the shorts, will be next. Volkswagen anyone?

From the 13D just filed.

The Reporting Persons may be deemed to be the beneficial owner of, in the aggregate, 14,015,151   Shares (including Shares underlying call options). The aggregate purchase price of the Shares and call options purchased by the Reporting Persons collectively was approximately $214.1 million (including commissions and premiums). The source of funding for these Shares and call options was the general working capital of the respective purchasers. The Shares and call options are held by the Reporting Persons in margin accounts together with other securities. Such margin accounts may from time to time have debit balances. Part of the purchase price of the Shares and call options was obtained through margin borrowing.


The Reporting Persons have conducted significant analysis with respect to the Issuer.  The Reporting Persons have concluded that the Company has a legitimate business model, with favorable long-term opportunities for growth.  The Reporting Persons intend to have discussions with management of the Issuer regarding the business and strategic alternatives to enhance shareholder value, such as a recapitalization or a going-private transaction.


The Reporting Persons acquired the Shares in the belief that the Shares were undervalued. The  Reporting  Persons may, from time to time and at  any time: (i) acquire additional  Shares  and/or  other  equity,  debt,  notes,  instruments  or other securities  (collectively,  “Securities”)  of  the  Issuer (or its affiliates) in the open market or otherwise;  (ii) dispose of any or all of their Securities in the open market or otherwise;  or  (iii) engage in any hedging or similar transactions with respect to  the  Securities.

As a reminder, this is what we said on January 2:

With the price virtually screaming for an epic short squeeze, is management, in consultation with its recently hired financial and legal advisors, contemplating a Volkswagen like short squeeze, where it conceives a transaction whereby there are simply not enough shares in the free float to satisfy the short interest. This could be facilitated especially if the firm’s institutional shareholders, chief among them Fidelity with 15% of the shares outstanding, were to pull their borrow (and one wonders just where Fidelity’s fiduciary responsibility lies if it allowed Ackman to put on a 20 million share short, at least according to him, a trade that could only be enacted if Fidelity allowed him to borrow its shares to short the stock against Fidelity’s long holdings), on top of a leveraged stock buyback or even MBO.


In short- could HLF, with 24% of its stock short, and where institutions control more than 76% of the shares outstanding, become the next Volkswagen squeeze play, and send the stock soaring far higher than ever before, in the process destroying Ackman (assuming he has still not covered his short), Tilson, and anyone else still short the name?

Herbalife stock after hours:

HLF’s short interest was 32.3% of the float at last check: if only the remaining long institutions decide to pull the borrow, the shorts will have one very big headache:

And here is what HLF shorts have to look forward to if HLF is indeed the next Volkswagen:

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