Herbalife Rises After Ackman Short Selling Spurs Buying
The shares advanced 12 percent to $32.94 at the close in New York for the biggest increase since May 16. The Cayman Islands-based company sank 38 percent in the week ended Dec. 21.
Ackman, head of New York hedge fund Pershing Square Capital Management LP, said earlier this month that a year of research convinced him Herbalife is a pyramid scheme. The company, whose shares he began selling short about seven to eight months ago, misrepresents sales figures, misleads distributors about potential earnings and sells a commodity product at inflated prices, he said.
The shares are relatively inexpensive now, which may be triggering increased buying, Timothy Ramey, an analyst at D.A. Davidson & Co. in Lake Oswego, Oregon, said in an interview. He advises buying the shares.
In an e-mailed statement after Ackman’s presentation, the company called his assertions a “malicious attack on our business model based largely on outdated, distorted and inaccurate information.”
The maker of nutritional and weight-loss supplements said last week that it hired Moelis & Co. as a strategic adviser. Herbalife will hold an analyst meeting to discuss Ackman’s comments on Jan. 10.
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.
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