Herbalife stock hits new high as Ackman drops five-year, US$1bn bet against company

01 Mar 2018 --- Pershing Square Capital Management CEO William Ackman has reportedly dropped his bet against Herbalife, five years after getting into an on-air spat with fellow investor Carl Icahn on CNBC. Ackman took a US$1 billion short position against Herbalife, after accusing the company of running a “well-managed pyramid scheme.” Although Ackman had expected the shares to fall to zero, Herbalife stock hit a new high of nearly US$96, with shares closing up 6.3 percent at US$92.10, following the news on Wednesday.

In November 2017, Ackman announced he had closed out the short position he had in the shares and converted it into a bet using put options after Herbalife shares had climbed an impressive 51 percent for the year.

For his next venture, Ackman is building a stake in aircraft parts manufacturer United Technologies Corp, the investor told CNBC yesterday, adding that he thought United Tech was a great company. The company's shares have since risen 3.4 percent to US$138.49.

Earlier yesterday, Herbalife announced plans to change its corporate name, refinance debt and effect a 2-for-1 stock split to boost shareholder returns. The company’s shares rose 7 percent to an all-time high following this announcement.

As part of this plan, the company updated its capital allocation strategy and reported that it is preparing to pursue a “modified Dutch auction” tender offer to purchase between US$450 million and up to US$650 million of shares of the Company's outstanding common stock. 

“Herbalife's strong financial performance is a testament to the demand for our great-tasting, quality nutrition products, the Company's unique, effective and personalized distribution channel and the Company's global geographic reach. This would be the first split in seven years and is part of our comprehensive program to increase shareholder value,” says Herbalife CEO Rich Goudis.

The nutritional supplement maker intends to change its name to Herbalife Nutrition Ltd., reflecting its “growing leadership and expertise in the field of nutrition.”

“We believe changing our company name to Herbalife Nutrition is more representative of our purpose to make the world healthier and happier and reflective of our strategies and investments to be the global leader in the nutrition industry,” Goudis says.

The proposals to change Herbalife's name and effect a stock split require shareholder approval and will be submitted to a vote at the Company's Annual General Meeting of Shareholders on April 24, 2018. If the shareholders approve the stock split, it is anticipated that the record date will be May 7, 2018.

Lucy Gunn