Monday was another controversial day in the life of Herbalife. The multi-level marketer of nutrition supplements raised its guidance for the full year and fourth quarter of 2013 and said its board of directors lifted its share buyback authorization. And the company announced plans to offer $1 billion in convertible securities. Meanwhile, Pershing Square Capital Management chief William Ackman, who has a large, high-profile, controversial negative bet on Herbalife’s stock, stirred the pot by publishing a detailed study of what he alleges are deceptive practices and recruitment systems used by several current and former Herbalife distributors, who he identifies by name. The report was posted to a website called www.herbalifepyramidscheme.com. “As an unlawful pyramid scheme, Herbalife fosters, promotes, honors and financially rewards pyramid schemes operated by its top distributors,” Pershing Square said in its announcement. “Because there is little genuine retail demand for Herbalife’s overpriced commodity products, the company depends for its revenues on the endless recruitment of new distributors.” If it’s possible, the Herbalife saga may be getting uglier.
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In other Pershing Square news, the hedge fund disclosed it sold 7.3 million shares of Beam, the liquor company, leaving it with an 8.3 percent stake. Before the sale, Pershing Square was the largest shareholder as of the end of the third quarter. Interestingly, the stock slipped minimally on Monday when the overall market plummeted. This is because in January Suntory Holdings, the Japanese whiskey and beer company agreed to buy Beam for $16 billion including debt.
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A group of directors from some of the largest corporations, institutional investors and advisory firms -- Tapestry Networks, Cadwalader, Wickersham & Taft, Teneo Holdings -- have banded together to form the Shareholder Director Exchange whose aim is to fight back against activist hedge fund managers. “Market conditions as well as an increasing focus on better and more effective governance practices have demonstrated the necessity of direct communication between directors and shareholders,” says Bonnie Hill, a director of AK Steel Holding, California Water Service Group, The Home Depot and Yum! Brands in a press release. The group says direct engagement improves transparency, mutual understanding and the overall quality of governance will reduce transaction and friction costs. We’ll see how it plays out.
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Mariner Investment Group announced that Robert Hodgson and Michael Oberdorf will run a global healthcare long/short equity portfolio on its Mariner Incubation Platform. This is the fifth portfolio to be run on the platform, which was launched in April 2013. Hodgson and Oberdorf formerly were founding partners and portfolio managers of Lenus Capital Partners where they managed a long/short equity healthcare fund. The pair had previously worked together at BlackRock and Merrill Lynch Investment Managers.
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The equity portfolio of Daniel Benton’s Andor Capital Management is now back up to $1.8 billion as of the end of the fourth quarter from $1.345 billion three months earlier. The tech specialist has large stakes in Facebook, Apple and Google, which account for one-third of its portfolio. Its biggest new position is Twitter, accounting for nearly 8 percent of the portfolio.
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Steve Cohen may no longer have outside investors, but his SAC Capital Advisors still must file a 13D or 13G when it acquires at least 5 percent of an individual company’s stock. On Monday, SAC disclosed it owns 5 percent of Lumber Liquidators Holdings, a flooring lumber retailer. The filing indicated the investment is passive.
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Exis Capital Management is the latest hedge fund to announce it is shutting down. Unlike Joho Capital and Scout Capital, the New York-based firm run by Adam Sender, is citing poor performance for its closure, according to The Wall Street Journal, citing people with knowledge of the matter. Sender, a one-time SAC Capital employee, only managed about $75 million at year-end, down from a high of $1 billion. It lost 5 percent last year, according to the paper.
