Will billionaire Bill Ackman ever learn to shut up?
Category: News & PoliticsBy: kavika • 2 months ago • 10 comments
There was a time, I must admit, when the hedge fund billionaire Bill Ackman was one of my Wall Street heroes.
It started in December 2012. Ackman had decided to take a short position in the shares of the multilevel marketing firm Herbalife.
Ackman justified his bet with a heroic 334-deck Power Point presentation laying out all the features of the Los Angeles company that he said made it indistinguishable from a scam: It marketed its nutritional supplements as unique products when they were actually commodity supplements sold at premium prices, he said. It was a pyramid scheme in disguise, and more.
Students are forced to withdraw for much less...Rewarding her with a highly paid faculty position sets a very bad precedent for academic integrity at Harvard.
Some of Ackman's points dovetailed with reporting by me and my colleagues at The Times — that its widely touted "affiliation" with UCLA was a penny-pinching attempt to gain reflected scientific credibility from the university's reputation (to UCLA's discredit) and that it exploited Latinos in its marketing, for example.
In short, I saw Ackman's campaign as an effort to take down a company that needed taking down. That was the good side of Bill Ackman — willing to take a short position in a high-flying stock and back it up with solid research. Only someone with a lot of money and even more personal vanity seemed capable of this audacious approach.
As it happened, however, Ackman's campaign also revealed the drawbacks of Ackmanism. He was so confident that government regulators would seize on his claims and bring the stock — then trading in the mid $40s — to zero, that he publicly disclosed that he had placed a $1-billion short bet against the company. (Short investments make money if the shares fall.)
His audacity brought Ackman haters out of the woodwork. Among those who harbored old gripes about Ackman was the storied investor Carl Icahn, who evidently (as I wrote) "relished the opportunity to put the squeeze on a short-seller who had been unwise enough to proclaim his vulnerable position to the world." Icahn took the other side of the bet, propping up Herbalife's price.
Ultimately, the company settled a Federal Trade Commission lawsuit by paying $200 million to 350,000 consumers who had been gulled by "Herbalife’s deceptive earnings claims" into signing on as Herbalife marketers. The company agreed to restructure its business.
That didn't save Ackman, because the company survived. He disclosed in early 2018 that he finally had exited his short investment in Herbalife, taking a loss that some investment analysts estimated at the full $1 billion.
Obviously, Ackman's mistake then was braggadocio. Had he kept his short bet quiet, he might have been able to ride Herbalife's price decline down to a healthy profit. But he couldn't resist boasting about how smart and audacious he was.
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