Hedge Fund Titan Bill Ackman Can’t Stop His War on Herbalife

Steve Sherman
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Posted: Oct 12, 2016 12:01 AM
Hedge Fund Titan Bill Ackman Can’t Stop His War on Herbalife

Bill Ackman, founder of the hedge fund Pershing Square, has been resolute in his quest to drive the stock of Herbalife into the ground. According to a piece in Fortune from last year, the Ackman siege of Herbalife has a goal of complete obliteration of the company. And despite repeated setbacks, it appears that Ackman will continue his war on the company.

Ackman’s actions are devastating for free markets and falls into the category of Crony Capitalism, because Ackman has tried to use the power of government to make good on his hedge fund bet. Ackman shorted Herbalife to the tune of $1 billion and he has used persuasion and attempted to use the brute force of government to end the company. Ackman’s war on Herbalife is a losing one.

I’d love to say, “Hey Bill, get a life! Forget about your obsession with bringing down Herbalife!”, but I can’t. Poor Bill Ackman has no choice, but to go down with the ship. When I say, “Poor” Bill Ackman it is only figuratively, of course, or in the sense that we should feel sorry for him, because Ackman is anything but poor.

If his quest to turn a quick billion or so by crushing Herbalife fails he will be a little lighter in the wallet, but don’t feel too sorry for him. He’ll get by. Guys like him always do. Usually at the expense of those around him. 

I’m sure Bill Ackman has wished he never hatched the plan to take a billion-dollar short position in Herbalife. Like a “Corporate Raider” of old, his intention was to tank the company and make many more billions in the process. However, Herbalife didn’t really want to be tanked. They fought back and they’ve essentially won in the honest business way of winning. They are still alive and profitable, but it hasn’t come without a price, for them or for “Poor” Bill.

What’s Ackman to do? His plan only worked if Herbalife hit rock bottom. It didn’t. He’s still on the hook for his billion and even if you’re a titan of industry, a billion is a lot of cash. He literally has to send Herbalife into bankruptcy to recoup his gamble. It’s not what you know, it’s who you know. Sometimes friends in Big Government can come in pretty handy. Bill has already attempted to use the muscle of the Federal Trade Commission to bring down Herbalife. A government for hire, is a weapon. Much to Ackman’s surprise….no luck…Herbalife survived the FTC assault.

A Fortune article, The Siege of Herbalife, describes what Ackman has done in his quest:

“[Ackman] has hired lobbyists to alert community groups to the alleged dangers of Herbalife and has given those groups money to find victims and connect them to regulators. His agents have set up websites, taken out ads, posted notices, and set up 1-800 numbers. They have tracked down former Herbalife employees and distributors, looking for whistleblowers. They’ve solicited nonprofits, concerned citizens, and politicians— including three congressmen and a U.S. senator—to write the FTC and at least seven state attorneys general, sometimes without the letter writers even realizing that a hedge fund manager was the master puppeteer orchestrating the campaign.”

You gotta give him a gold star for effort, Bill’s not giving up. But neither is Herbalife. They’ve streamlined their entire business model. Critically forced every piece of it to be beyond reproach in the eyes of the court and man. When you are under attack, you have to get lean and mean. It appears that Herbalife has done just that.

That’s why I feel sorry for “poor” Bill Ackman. 

What’s he to do? Just give up, walk away, and leave a billion dollars on the table?

He can’t do that.

Maybe Ackman is starting to grasp the essence of the classic tale, Moby Dick. Captain Ahab had an obsession. It’s starting to look like Ackman has one too. 

It didn’t work out to well for Captain Ahab…I wonder how it will play out for Ackman?

It might be time for Ackman and his Pershing Square investors to take a loss and give up. It does not look like they will be successful in killing the company.

Bill Ackman’s Pershing Square quest to crush Herbalife is not working. It might be time to cut his losses and stop trying to destroy the company.