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What's he thinking? Billionaire investor Carl Icahn has reportedly bought a stake in Herbalife.
Hedge fund manager Bill Ackman has made a very big, $1 billion bet against Herbalife, arguing that the nutritional supplements company, headquartered in L.A., is a pyramid scheme. His stated goal: drive Herbalife out of business.
Fellow hedge funder Dan Loeb has countered Ackman's "big short" with a long position, betting that Herbalife will survive.
Now another heavyweight investor has joined the fray: Carl Icahn. While Icahn has reportedly told other investors that he has bought a stake in Herbalife, we don't yet know how he's placing his bets. But I wouldn't bet against the idea that he's joining Loeb in taking a long position. Icahn and Ackman are not exactly good buddies. This is from the Wall Street Journal:
There is no love lost between...Ackman and Icahn. The two billionaire hedge-fund managers spent years tangling in court over a sum of $4.5 million. The dispute centered on profits Mr. Icahn made in the sale of shares of Hallwood Realty Mr. Ackman had sold him in 2003, according to a 2011 article in the New York Times on the feud, with the two agreeing they would split profits above 10% if Mr. Icahn sold his shares within three years.
In 2004, Hallwood merged with another company, sending share prices up. Mr. Ackman thought he was due a cut of Mr. Icahn's profit; Mr. Icahn said a merger didn't equal a sale of shares. Mr. Ackman ultimately won the legal dispute, walking away with nearly $9 million, including accrued interest.
It makes you wonder: Is Icahn jumping in because he thinks it's a good investment? Or does he just like the idea of turning up the heat on Ackman, ahead of Herbalife's earnings statement for the fourth quarter of 2012, due out on Friday?