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Morning Brief: Bill Ackman’s Pershing Square Closes Out Herbalife Bet

The activist fund manager called it quits on one of the most contentious activist battles of all time.

It looks like Bill Ackman has thrown in the towel on his Herbalife short. The head of Pershing Square Capital Management, who famously duked it out with Carl Icahn after the octogenarian took a sizable long position in the stock, told CNBC’s Scott Wapner he is unwinding his put options position in the multi-level marketer of health and nutrition products. This is the company Ackman famously shorted several years ago, asserting its value would go to zero once the world realizes it is one big pyramid scheme. The report came on the same day Herbalife’s stock surged 6.3 percent, to a new high of $92.10, after the company announced several moves designed to boost its stock price.

It said it is planning a “modified Dutch auction” tender offer to purchase between $450 million and $650 million of its shares. The company also said it is planning to refinance a portion of its $1.15 billion of convertible notes due on August 15, 2019, which it believes will “allow the company greater flexibility in the use of its capital.” The company expects to complete these transactions in the second quarter. Herbalife also said it plans to split its stock two-for-one. Finally, the company is changing its name to Herbalife Nutrition. The largest long investor remains Carl Icahn. In late January D.E. Shaw reported owning a 5.4 percent stake in the company.


Separately, Wapner said Ackman is building a stake in conglomerate and defense contractor United Technologies. The activist supposedly called UT a “great company.” However, he wouldn’t go into further detail. Last week UT chief executive officer Greg Hayes told a Barclays investor conference his company is studying a plan to split up the company, which makes elevators, air conditioners and jet engines, among other things, according to Bloomberg.

UT plans to make an announcement by the end of the year, according to the report. “Is UTC a more valuable property together or is UTC better off in three separate businesses?” Hayes reportedly said. “That’s the question for the board. That’s the question we continue to study.” The stock Tuesday closed at $134.74, up 0.6 percent on an otherwise down day for stocks in general. UT is the fourth-largest U.S. long of Viking Global Investors and the fifth-largest long of Suvretta Capital Management, according to regulatory filings.


Bad day for Valeant Pharmaceuticals International, formerly a big (and losing) position for Ackman. The stock plunged 11.4 percent on Tuesday, to $16.49, after the drug company reported decent quarterly results but issued disappointing sales guidance for 2018, according to Barron’s. The two largest shareholders remain Paulson & Co. and ValueAct Holdings, while Renaissance Technologies is the third-largest shareholder.


Shares of hedge fund favorite Endocyte, a biopharmaceutical company, surged about 40 percent, to close at $5.87, after Cowen upgraded the shares to outperform. The company also announced an offering of an additional 17.857 million shares at $4.20 per share, which traditionally would hurt a stock price. In the fourth quarter, several hedge funds established new positions, including Partner Fund Management, now the largest shareholder; RA Capital Management, now the second-largest investor; and Perceptive Advisors, now the sixth-largest shareholder. D.E. Shaw became the fourth-largest shareholder after more than quadrupling its stake.

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