Pershing caps Herbalife short
ACTIVIST investor William Ackman, who placed a $1bn (€860m) bet in 2012 that Herbalife Ltd’s stock price would collapse to zero, said on Wednesday his firm has capped losses by closing out its short position in the nutrition and supplements company.
Herbalife has been buying back shares and its stock price has soared some 50pc this year, piling pressure on Ackman’s $10bn hedge fund as paper losses mounted and the cost to borrow the shares rose. Ackman did not disclose how much his firm, Pershing Square Capital Management, had lost by buying shares to cover its short position.
“We covered the shorts and replaced them with outright put positions,” Ackman told Reuters, adding that potential losses on Herbalife will now be capped at 3pc of the firm’s capital. “We can still lose money but the loss is capped.”
Short positions, in which borrowed shares are sold to be replaced later at a lower price, mean heavy losses if the stock’s price rises.
Put options give the holder the option to sell a stock at a set price. (Reuters)
William Ackman did not disclose how much his firm lost