This content is from: Portfolio
The Morning Brief: Herbalife’s Crazy Day and Icahn’s Victory Lap
Big day for Herbalife investors. Trading in the shares of the multi-level marketer of nutrition products was halted late in the trading day Monday with the stock up more than 3 percent. That’s when the company announced that PricewaterhouseCoopers had completed its re-audit of the company’s financial statements for the three years ending 2012 and the audit of the effectiveness of the company’s internal control over financial reporting as of December 31, 2012. the firm reported that no material changes were made to its results from 2010 to 2012. Remember, its financial reports had to be re-audited when a former partner of its prior auditing firm, KPMG, resigned when he was charged with insider trading. When trading in Herbalife resumed later Monday, the stock zoomed up, closing at $74.85 for a gain of 9.46 percent. “I never doubted Herbalife is a viable company,” Carl Icahn told CNBC, seemingly taking a victory lap. Icahn has famously hurled barbs at Pershing Square Capital Management’s William Ackman, who has called Herbalife a pyramid scheme.
Said the firm in a statement: "It is not the role of Herbalifes auditor to determine if the company is a pyramid scheme. Rather, that determination depends on whether distributors earn more from recruiting new distributors than from retail sales to consumers who are not distributors. The few Herbalife distributors that make money earn the vast majority of their profits from recruiting. Herbalife is a pyramid scheme that will be shut down by regulators."
More consolidation in the funds of hedge funds business: Switzerland-based Gottex Fund Management Holdings agreed to acquire EIM Group in a stock-for-stock deal valued at a little more than $35 million. The combined companies will have close to $10 billion under management by the first half of 2014, the companies stated in a press release. The price tag underscores the relatively low value of funds of funds, a business that has been consistently shrinking since the 2008 financial meltdown. “Consolidation is the name of the game for everybody in the industry,” Gottex chief executive Joachim Gottschalk told BusinessWeek. “The cost base for regulation and in general is not on the way down. It is on the way up.”
Hedge fund favorite Valeant Pharmaceuticals International surged nearly 4 percent Monday after it announced it will acquire Solta Medical for about $250 million. Jeffrey Ubben’s ValueAct Capital is the third largest shareholder and the San Francisco–based activist firm’s second largest investment. Other top-10 investors with significant holdings include Tiger Cubs Viking Global Investors and Lone Pine Capital, even after they reduced their stakes in the third quarter.
Greenlight Capital short Green Mountain Coffee Roasters is rallying again. After briefly dropping below $60 in mid-November, the stock has consistently climbed, closing Monday at $74.13. It is now up 80 percent for the year.
The Credit Suisse Hedge Fund Index rose 1.31 percent in November, bringing its gain for the first 11 months of the year to 8.43 percent. The event-driven index is up 13.64 percent for the year, while long-short equity is up 15.65 percent. Not surprisingly, dedicated short bias is off 24.36 percent year-to-date.
Tiger Cub Joho Capital, headed by Robert Karr, disclosed it owns 7.7 percent of 58.Com Inc., a Chinese internet company sometimes called the Craigslist of China.