On Friday, Herbalife shares soared 20 percent to close on a 9.9 percent gain at $65.25 after the news that the company had reached a deal with the Federal Trade Commission (FTC). However, the $200 million was not to William Ackman’s liking who has so far led a fiery campaign to destroy the MLM business.
Herbalife CEO Michael Johnson said that the settlement was a clear sign that the company’s business model was “sound” despite rumors that the firm may be nothing more than a pyramid scheme. Even the federal agency reportedly stopped short of calling its business model as such.
Johnson also said that the company is a real business with real sales so he challenged the agency’s accusations.
Ackman on the other hand believes that the commission’s findings are more significant than a “pyramid” label. He hopes that once the company will start restructuring the pyramid will turn into rumble.
The rise in stock price this Friday adds further pressures on Ackman struggling portfolio. Though he has placed a $1 billion bet against the L.A.-based firm, his hedge fund management firm’s portfolio plunged 19 percent since the start of the year after a similar decrease last year.
For Ackman’s fund to regain steam, Herbalife shares need to sink to a $30-per-share level i.e. half the current amount.
On Friday, the investor pledged maintain his stance, but it is not certain for how long. However, Pershing Square received other hard blows in recent months including a failing bet on a struggling pharmaceutical company, Valeant Pharmaceuticals International Inc.
Valenat mishaps has damaged Ackman’s portfolio in other positions which he was forced to eventually liquidate.
In the meantime, Ackman’s personal batttle against billionaire Carl Icahn is ongoing. The two billionaires turned Herbalife into their battleground as Icahn placed a hefty bet on the organization.
According to a Herbalife report, Icahn was recently given the green light to buy 34.99 percent stake in the company. He now holds just 18 percent. Icahn thinks that the latest settlement consolidates his faith in the company.
In a recent statement, the billionaire investor said that he and Ackman are ”on friendly terms” on other subjects but they fail to agree on the Herbalife topic. He expressed his strong belief that the firm is on the fast-track to growth now that the FTC “cloud” is gone.
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