In recent weeks, Bill Ackman has shorted the stock of Herbalife stock which means he is betting that the price of stock will go down and that he will benefit from this position. His hypothesis is that Herbalife is an illegal multi marketing scheme and with a spotlight on the company (that he has imposed), their operation will be shut down completely. The interesting part of this story is that Carl Icahn has taken a completely opposite position in the same company and in effect betting against Bill Ackman.
What is interesting is that Bill Ackman's position does nothing to create capital or enhance the company's profits. The same can be said for Carl Icahn. It doesn't even appear that either of these investors have looked at the balance sheet or care about the balance sheet. All they care about is the stock price of Herbalife. This battle is nothing more than a high stakes poker game between two competitors with deep pockets. It's like watching two enemies sitting at the final table with substantial chip stacks ready to go to war. Sure there are a few variables such as the Federal Trade Commission, company performance, and investment decisions from the crowd. Carl has a hot hand right now with his recent performance returns in his portfolio. You have to believe that Ackman is seething when laying in bed at night thinking about how Icahn may have foiled his plan.
I wonder if there is a bookie out there taking bets on who wins this battle. It seems that Icahn has the upper hand in this one. Capital requirements and stock movement aside, Ackman may not be able to hang on to his shorts. Stock loans for shorting are not unlimited in shares and length of time. Ackman may have to cover his position whether he likes it or not. I'm leaning toward Icahn winning this bet. Let's see where the chips fall!
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