Einhorn Closed Short Position in Herbalife, WSJ Says

(Corrects name of hedge fund in first paragraph of story published Jan. 23.)

David Einhorn, who questioned Herbalife Ltd. (HLF) in May, said his hedge fund, Greenlight Capital LP, closed a short position in the company last year, the Wall Street Journal reported, citing people familiar with the matter.

Einhorn told investors at a meeting yesterday that the short sale was profitable, though he didn’t disclose the size of the profit or the position, the newspaper reported.

Last year, Einhorn, chairman of Greenlight, asked executives at the nutritional supplement maker why they had stopped providing information tracking certain groups of its distributors in its filings. Einhorn didn’t say if he was an investor of Herbalife, which sells vitamins, shake mixes and skin gels through a marketing network of independent distributors worldwide.

In its annual letter sent to investors yesterday and obtained by Bloomberg News, the company said it has made a “modest reduction” in its short exposure at the end of the year, without disclosing whether it held a position in Herbalife.

“As always, we continue to reexamine our positions. Some we have kept, some we have added to, and some we have reduced or eliminated,” the company said in the letter.

Inflated Pricing

Bill Ackman, founder of New York hedge fund Pershing Square Capital Management LP, joined Einhorn last year in raising questions about Herbalife. On Dec. 20, Ackman appeared at a Sohn Investment Conference in New York and accused Herbalife of using inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme.

Herbalife fell 2.6 percent to $43.01 at the close in New York. The shares have gained 31 percent this year after tumbling 36 percent in 2012.

Earlier this month, Herbalife reported preliminary fourth- quarter profit that topped analysts’ estimates as net sales rose about 20 percent in the period.

“Herbalife is a financially strong and successful company, having created significant opportunities for distributors and positively impacted the lives and health of our consumers over our long history,” Chief Executive Officer Michael O. Johnson said in a statement on Jan. 17.

Short-selling refers to the practice of borrowing shares and selling them, with the goal of profiting by repurchasing them later at a lower price. A pyramid scheme is a scam in which people pay money or buy goods, typically not a genuine product, for the chance to earn profits when others join the scheme, according to the U.S. Securities and Exchange Commission.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.