Icahn, others acquire stakes in Herbalife, taking on Ackman
By Svea Herbst-Bayliss | February 15, 2013 10:42 AM EST
Fund managers, most prominently Carl Icahn, are showing a strong taste for weight management and nutrition company Herbalife Ltd
Icahn, the billionaire investor, said on Thursday in a regulatory filing that he now owns 14 million shares of the company, or nearly 13 percent of it. The news sent Herbalife shares up 17 percent in after-hours trading.
The filing, which said Icahn wants to explore strategic options with management, finally puts a number on what Icahn owns.
It also sharpens the battle lines between hedge fund industry heavyweights William Ackman and Daniel Loeb. Ackman argues that the company is a house of cards and its stock should drop to zero, while Loeb sees room for Herbalife shares to climb to $68. The shares closed on Thursday at $38.27.
Icahn has now replaced Loeb, who told investors in January that he had bought an 8 percent stake in Herbalife, as the most prominent rival to the short position Ackman has taken.
Loeb and Icahn are keeping company with two managers who were mentored by industry legend Julian Robertson, plus a fund started by mutual fund powerhouse Fidelity Investments, new regulatory filings show.
Those managers might have gotten in at a low price and made money as the stock moved higher again in January.
Phillipe Laffont, who founded Coatue Management after working for Robertson's Tiger Management, owned 850,000 shares at the end of December, according to a filing made with the Securities and Exchange Commission on Thursday.
Similarly Patrick McCormack, another so-called Tiger Cub, reported that his Tiger Consumer Management nearly doubled its exposure to 2.3 million shares at the end of December. In the third quarter, it owned 1.4 million shares, which ranked it among Herbalife's 20 largest investors.
Geode Capital, which was started by Fidelity, upped its holding in Herbalife slightly.
Loeb's regulatory filing for the fourth quarter showed that he owned roughly 3 million shares of Herbalife at the end of December, signaling that he kept buying the stock in early January before announcing that he owned 8.9 million shares.
By January 3, Loeb was Herbalife's second-biggest investor after Fidelity Management & Research Co.
Some of the newcomers may have been tempted to enter the fray precisely because Ackman helped drive the price down dramatically in December, when he said he was shorting the company. Icahn did not list the company as one of his holdings at the end of December.
Shares of Herbalife, which plunged 40 percent after Ackman's presentation, surged 76 percent during the height of a short squeeze, which took place approximately from December 24 to January 15, when some of these hedge fund managers may have come in.
(Reporting By Svea Herbst-Bayliss; Editing by Steve Orlofsky)
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