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The Morning Brief: More Bad News for Bill Ackman
More woes for William Ackman’s Pershing Square Capital Management. Shares of Herbalife surged more than 20 percent on Friday after the controversial multi-level marketer of health and nutrition products said it is in discussions with the Federal Trade Commission to settle the government’s probe of the company’s selling practices. In its annual report filed Thursday with regulators, the company said it “is currently in discussions with the FTC regarding a potential resolution of these matters.” It added: “The possible range of outcomes include the filing by the FTC of a contested civil complaint, further discussions leading to a settlement which could include a monetary payment and other relief or the closure of these matters without action.” Herbalife adds that it is cooperating with the investigation and that it is difficult to predict the timing and the likely outcome.
Herbalife, of course, is the target of a major short bet made by Pershing Square, a New York activist firm. Meanwhile, shares of one of Pershing Square’s long positions, Valeant Pharmaceuticals International, fell nearly 5 percent on Friday, to $80.65, just above its three-year low. Just two weeks ago the stock had seemed to be on the rebound, but it is down nearly $15 per share since then.
Pershing Square is down 17.3 percent so far this year through February 23 after dropping more than 20 percent last year.
Shares of SunEdison, one of the most volatile stocks around these days, surged more than 31 percent, to $2.26, after the Delaware Court of Chancery denied Appaloosa Management’s request for a preliminary injunction related to TerraForm Power’s planned purchase of certain assets from parent SunEdison after SunEdison acquires Vivint Solar. In a statement, SunEdison said it was “gratified” by the decision. Short Hills, New Jersey-based Appaloosa, headed by David Tepper, has called into question the arm’s length relationship between SunEdison and TerraForm, which is sometimes called a SunEdison yield co that holds a portfolio of wind and solar assets.
Total hedge fund industry assets fell below $3 trillion, to $2.96 trillion, owing to investment losses and redemptions in January, according to data tracker eVestment. This is the first time assets dipped below that threshold since they exceeded the level in May 2014. Performance losses amounted to $43.2 billion in January, while net redemptions accounted for $21.5 billion.
“Flows have been weak or negative in all except one January since 2008 as investor redemptions from the prior year carry over before new assets are allocated en masse,” eVestment says in its monthly report. “February has historically been the barometer month for the year’s flows.” Still, eVestment does point out that the month’s redemptions were the largest in January since 2009. On the other hand, emerging markets funds enjoyed a net increase in fund flows, as investors put money into EM debt as well as funds focused on China’s equity and debt markets, according to the report.
Elliott Management Corp. boosted its stake in Cabela’s over the past two weeks, to 11.3 percent. Two weeks ago, the New York hedge fund firm urged the outdoors specialty retailer to put itself up for sale, among other options.