Pershing Square Herbalife Analyst Dinneen Exits Fund Firm

Bill Ackman, founder of Pershing Square Capital Management LP, told clients that Shane Dinneen, the analyst who had done much of the original work on the firm’s money-losing bet against Herbalife Ltd., has left.

“For several months, Shane Dinneen, a member of our investment team since late 2007, has expressed interest in leaving Pershing Square to pursue other interests,” Ackman wrote yesterday in a letter, a copy of which was obtained by Bloomberg News. “As Shane is one of the most talented investment analysts I have ever worked with and someone I hold in high regard, I have done my best to convince him to stay with the firm. Recently, he decided it was time for him to move on to areas of his own interest outside of activist investing.”

Ackman’s $1 billion short bet on Herbalife, a wager he made at the end of 2012, backfired last year as the stock more than doubled in price. Dinneen had been part of several successful Pershing investments, including General Growth Properties Inc. and Burger King Worldwide Inc., Ackman wrote. He added that Dinneen hadn’t worked on Herbalife in the past year as legal and regulatory aspects of the investment had become more important. Roy Katzovicz, chief legal officer, and David Klafter, senior counsel, have been leading the effort since then.

Based on the average trading price at the time that Ackman initially made the wager, his New York-based firm sold short at about $48.58 a share. The stock closed yesterday at $62.54, down 2.4 percent in New York trading.

“With respect to Herbalife, we remain convinced that the company has operated an illegal pyramid scheme since its founding,” Ackman wrote. “We are encouraged by the recent regulatory developments concerning the company.”

Herbalife, the Cayman Islands-based vitamin and shake maker that has denied Ackman’s assertions, fell 18 percent in two trading days last week to $60.06 after a U.S. senator called for a probe into its operations and a Chinese media outlet raised suspicions about the company’s legality.

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