Monday was not a good day for Pershing Square’s Bill Ackman. Shares of Herbalife surged more than 10 percent to close at $44.08. The stock is now up nearly 70 percent from its Christmas Eve low.•••
On Monday, shares of Apple temporarily fell below $500 for the first time since February on news that orders may be weaker than expected for the iPhone 5. It closed at $501.77, down 3.56 percent for the day. The shares of the hedge fund favorite are down 5.7 percent year so far this year.•••
Meanwhile, Sears Holdings, which is controlled by ESL’s Eddie Lampert, surged nearly 9 percent to $44.60. Late Friday ESL Partners’ Eddie Lampert reported he had bought 340,000 shares of the struggling retailer’s sagging stock at slightly less than $41 apiece, bringing the total holdings of ESL and Lampert to 56.5 percent of the total outstanding.•••
Paul Singer’s Elliott Associates has turned up the heat on Compuware. The hedge fund, which previously offered to acquire the company for $11 per share, or a total of $2.3 billion, fired off a letter to the company’s board of directors urging it to make a decision and warned the company it is prepared to make a hostile bid, if necessary. “Our offer would provide stockholders with certain, premium value today – however, as each week passes, stockholders are exposed to greater risk as markets can move, the company's performance may continue to deteriorate, and macro events may come into play,” Elliott states in the letter. Elliott now has 8.1 percent economic ownership, which includes 6.6 percent of common stock plus derivatives equivalent to an interest in 1.5 percent of common stock.•••
Here is the downside to playing merger arbitrage. A number of hedge funds are said to have suffered big losses after United Parcel Service scrapped its offer to acquire TNT Express for $6.9 billion after the two companies were told the European Commission would prohibit the deal. Merger arbs, who generally like to buy the targets of deals and hedge by shorting the acquirers, reportedly lost more than $700 million after shares of TNT Express plunged 41 percent on Monday. UPS initially made its offer for TNT last February.