Bill’s bitter herbs
Ackman hit by jolt
Herbalife had a surprisingly strong quarter, tightening a squeeze on hedge fund billionaire Bill Ackman.
The Los Angeles-based supplements distributor reported better-than-expected first-quarter results and raised its guidance, which sent shares up 6 percent, to $65.80, in after-hours trades.
The stock spike further bruised Ackman’s Pershing Square hedge fund, which placed a $1 billion short bet on the company in December 2012, alleging that the operation is a pyramid scheme.
Profits fell 11 percent, to $85.2 million, from $95.8 million last year, but came in higher than Wall Street’s expectations of $77.8 million.
Also giving shares an afterhours jolt was the company raising its full-year guidance by 40 cents, to a range of $4.05 to $4.45.
“There was all this news agitated by a short seller. Fake news,” outgoing Chief Executive Michael Johnson said on a panel at the Milken Conference Wednesday.
Nevertheless, Herbalife paid a $200 million settlement to the Federal Trade Commission in July, ending a probe into whether or not the multilevel marketing company is a pyramid scheme. The FTC said Herbalife would have to start “operating legitimately” and gave the company until May to make changes.
Herbalife said it “believes” it is on track to make the changes, though Ackman insists that the changes will be the company’s undoing.
“We remain short Herbalife because webelieve intrinsic value is meaningfully be- low the current share price,” Ackman said in a shareholder presentation released last month.
Herbalife, however, said that some of those changes, which include verifying its distributors’ sales through receipts, have helped the company.
“We’re gaining direct transaction-level visibility and insights into our customers’ nutrition buying patterns,” incoming CEO and current Chief Operating Officer Rich Goudis said on the call.
Shares of Herbalife closed down 0.3 percent, at $62.20, on Thursday before popping after hours. At the time Ackmanannouncedhis short bet, shares traded in the mid-$40 range.
Representatives from Pershing Square declined to comment.