A worker cleans the logo on the Herbalife sign as finishing touches are put on the company's building in Torrance, Calif. The company has defended itself against charges that it's a pyramid scheme.
Hedge fund manager Bill Ackman, who runs Pershing Square Capital Management, has taken a $1-billion-plus short position against L.A.-headquartered Herbalife, the diet and nutritional supplements company.
Ackman says Herbalife is operating a pyramid scheme: its business depends on signing up new suckers, not on actually selling products. He's pledged to drive the company, in the language of finance, "to zero."
Ackman's fellow hedge fund manager Dan Loeb is taking the other side of that bet. He's buying up Herbalife shares, whose value was depressed last year following a three-hour presentation (complete with 343 PowerPoint slides) by Ackman.
Ackman is short. Loeb is long. And Herbalife is stuck in the middle.