Bill Ackman, founder of Pershing Square Capital Management LLC, may consider his public condemnation of Herbalife Ltd. (NYSE: HLF) "the most important presentation" of his career, but you wouldn't think so looking at Herbalife stock today (Tuesday).
The nutrition company is up more than 25% following the presentation, after losing 11% on word yesterday (Monday) that Ackman was prepared to deliver the "deathblow" to HLF.
Ackman's public battle with HLF has touched off a clash among Wall Street's activist investor community.
In December 2012, Ackman accused the health supplement company of running a "pyramid scheme" through its complex sales structure that recruits hundreds of thousands of members to sell their products and blurring the lines between actual sales of its products and sales to its individual distributors. Among his claims is 88% of recruited salespeople make no money, and 96% make less than the minimum wage.
This put him at odds with noted investors Daniel Loeb of Third Point LLC and Carl Icahn of Icahn Enterprises LP (Nasdaq: IEP). As Ackman mounted a $1 billion short position in the company, activist investors took the other side and bought long.
In Tuesday's presentation, Ackman provided further evidence and expounded upon earlier claims that HLF was preying on poor minorities and impoverished countries to act as distributors, offering lofty promises that HLF sales will make them rich.
"[Herbalife CEO] Michael Johnson is a predator, and this is a criminal enterprise," Ackman said at his presentation at the AXA Equitable Center in New York.
But Ackman's plea failed to move this stock in his favor, and HLF shares took off.
Ackman isn't alone in betting against HLF. The current short float on HLF is a rather high 28.2%, against the S&P 500's average of just around 2%. In yesterday's trading, according to 10 different exchanges reporting short volume, shorts on HLF made up 57.8% of total trade volume.
And on the year as this activist investor face-off continues, the short-sellers have made out well. Herbalife stock, as of this morning, had dropped 31.3% (although that is quickly tightening based on today's rise).
While this has been a battle almost two years in the making between short sellers, activist investors, and a nutritional supplement company, the unusual history of HLF provides an interesting look at the company underlying this debate.