Icahn Says No Respect for Bill Ackman After Herbalife Bet
By Miles Weiss - Jan 25, 2013 5:39 PM ET
Carl Icahn, reviving a decade-old feud with hedge-fund manager
William Ackman, said the founder of Pershing Square Capital Management
LP is taking “inordinate” risks in a wager against Herbalife Ltd.
disclosed last year.
Icahn, billionaire investor and chairman of Icahn Enterprises Holdings
LP, is seen in this March 27, 2012 photo. Icahn, like William Ackman,
has been accused of using aggressive tactics to squeeze profits from
his investments. Photographer: Scott Eells/Bloomberg
(Bloomberg) -- Billionaire investor Carl Icahn discusses his outlook
on Herbalife and Bill Ackman. He speaks on Bloomberg Television's
"Street Smart." (Source: Bloomberg)
(Bloomberg) -- Billionaire investor Carl Icahn talks about the
performance of Netflix Inc. and CVR Energy Inc., and hedge-fund
manager William Ackman's $1 billion bet that shares of Herbalife Ltd.
would decline. Icahn speaks with Trish Regan on Bloomberg Television's
"Street Smart." (Source: Bloomberg)
Ackman, founder and chief executive officer of Pershing Square Capital
Management LP, is seen in this Dec. 20, 2012 photo. He said he had
turned over more than a year’s worth of research to the U.S. Federal
Trade Commission in support of his contention that Herbalife is a
pyramid scheme. Photographer: Scott Eells/Bloomberg
Herbalife Ltd. logo is displayed outside of the company's corporate
headquarters in Torrance, California. Ackman said Herbalife uses
inflated pricing, misleading sales information and a complicated
incentive structure to hide a pyramid scheme. Photographer: Patrick
Icahn, who spent more than seven years wrangling
with Ackman in court over $4.5 million, said in an interview yesterday
that Ackman’s assertion that he was shining a spotlight on Herbalife, the
marketer of weight-loss and nutritional supplements, was “disingenuous.”
In a statement today, Icahn said he would never invest with Pershing
Square, citing Ackman’s short sale of more than 20 million Herbalife
“Selling short 20 percent of the shares of a company
such as HLF with limited partners’ money that can be withdrawn, in my
opinion, leaves much to be questioned,” Icahn said. Noting that Ackman
yesterday called him a “great investor,” Icahn said, “I thank him but
unfortunately I cannot return the compliment.”
Ackman’s wager had already pitted him against
Daniel Loeb in a rare public dispute among hedge-fund managers over
whether Herbalife is a legitimate enterprise or a fraud. On Jan. 10, three
weeks after Ackman disclosed his bet against Herbalife, Loeb’s
Third Point LLC reported in a regulatory filing that its
hedge funds held 8.9 million company
shares at year-end.
Herbalife had about 108 million shares outstanding
as of Oct. 24, according to the company’s latest quarterly report.
Speaking at the Sohn Investment Conference in
New York on Dec. 20, Ackman detailed his short-selling strategy
through a presentation that lasted more than three hours, including a
question-and-answer period, and featured more than 340 slides. Accompanied
Pershing Square’s chief attorney, Ackman said Herbalife uses inflated
pricing, misleading sales information and a complicated incentive
structure to hide a pyramid scheme
Icahn, in an interview yesterday with
Trish Regan on Bloomberg Television, said he doesn’t “like” or
“respect” Ackman and questioned his motives for publicizing the Herbalife
short sale. In a short sale, an investor sells borrowed shares in
anticipation the price will drop, providing a profit when the trade is
“You don’t go out and get a room full of people to
bad- mouth the company,” Icahn said. “If you want to be in that business,
why don’t you join the SEC,” Icahn added, referring to the U.S. Securities
and Exchange Commission.
Icahn, like Ackman, has been accused of using
aggressive tactics to squeeze profits from his investments. During a
takeover battle for Trans World Airlines in the 1980s, TWA Chairman C.E.
Meyer Jr. famously described Icahn as “one of the greediest men on Earth.”
Ackman said yesterday in an interview that the
falling out between the two dates to 2003, when his Gotham Partners LP and
its affiliates agreed to sell Icahn a 15 percent stake in Hallwood Realty
Partners at $80 a share. The contract included a provision that Icahn
called “schmuck insurance,” according to Ackman: if Icahn sold the stake
at a higher price within three years, Ackman’s investors got to share in
the added profits.
A year later, Hallwood was sold for about $136 a
share and “Carl owed my investors about $5 million,” Ackman said in the
interview. Icahn refused to pay and Ackman sued, starting a court battle
that would last until 2011, according to Ackman, when his investors
finally got their money.
“Eight years after he was supposed to pay, we got
justice and Carl paid,” Ackman said. “He called me to congratulate me for
winning and said, ‘Now we can be friends.’ I told him I had no interest in
being his friend.”
Icahn disputed that version of events in today’s
“To get the record straight, I never asked Ackman to
be my friend,” he said.
Icahn said he was helping Ackman “out of a jam” in
the 2003 transaction. Hallwood was acquired in a merger rather than
through an outright sale, Icahn said, adding that his firm voted against
“We did not believe that the agreement covered such
a situation,” he said. “However, Bill sued and was able to convince New
York courts” not to follow precedents set in other states.
Herbalife (HLF) closed at $42.50 on Dec. 18, the day before Ackman’s
wager against the stock was first reported by CNBC, the shares
dropped more than 12 percent the next day. By Christmas Eve they
closed at $26.06, down 39 percent in four trading sessions.
Herbalife shares have rallied since the conference
after the company and other investors rebutted Ackman’s case. The stock
rose 0.8 percent today to close at $43.59 in New York.
During the conference, Ackman said he had turned
over more than a year’s worth of research to the U.S. Federal Trade
Commission in support of his contention that Herbalife is a pyramid
scheme, adding that he would give any profits from the short sale to
charity. After Third Point questioned the basis of Pershing Square’s
thesis in a January note to clients, Ackman said his goal was to “shine a
spotlight” on Herbalife “so that the world better understands” the facts
about the company.
In yesterday’s interview, Icahn questioned Ackman’s
motives and said the
money manager was being “completely disingenuous” about shedding light
on the company. “But I think
Bill Ackman is disingenuous,” he said.
Regarding Ackman’s plan to donate any profits from
the trade, Icahn asked during the interview, “Is he giving the money he
makes for all his limited partners to charity?” If his investors profit,
the billionaire said, Ackman “becomes famous” and “gets more money in” for
new hedge funds.
Pershing Square is seeking at least $3 billion for a
new fund that will eventually be publicly traded on the London Stock
Exchange, according to a November investor letter. The firm had raised
$2.2 billion, according to the letter, primarily from existing clients who
converted some or all of their holdings in the firm’s other vehicles.
Icahn and Ackman have a similar approach to
investing. Both short stocks they deem overvalued and both buy shares in
companies they view as under-performing and then agitate for changes
designed to drive the company’s value up.
Icahn’s returns have been getting a lift from the 10
Netflix Inc. (NFLX) he reported holding in September. Netflix shares
soared 42 percent yesterday after the world’s largest online-video service
reported an unexpected profit, leaving Icahn with a $490 million one-day
paper gain on his investment.
Ackman’s funds have been hurt by the 18 percent
stake Pershing Square acquired in retailer J.C. Penney Co., last year’s
fifth-worst performing stock in the
Standard & Poor’s 500 (SPX) Index. Ackman ended the year with a 13
percent gain, according to an investor briefed on the returns, compared
with the 16 percent return by the
S&P 500, with reinvested dividends.
Pershing Square averaged annual returns of 16
percent from its inception at the end of 2004 through November, said the
investor, who requested anonymity because the information is confidential.
The returns are net of the fees Ackman charges clients, listed as 1.5
percent of assets under management and 20 percent of profits in Pershing
Square’s registration with the SEC.
Icahn, who returned capital from outside clients in
2011, said on CNBC today that his investments generated a 28 percent
return last year. He had a 5 percent return after expenses through the
first nine months of the year, according to a quarterly report filed by
Icahn Enterprises Holdings LP with the SEC on Nov. 13.
In 2011, Icahn generated a 35 percent return before
fees, according to Icahn Enterprises. Icahn’s annual returns averaged 13
percent from the inception of his hedge funds in November 2004 through
September, the holding company’s filings show. The average annual figure
is before fees that Icahn collected from outside investors until two years
Icahn, in yesterday’s interview, wouldn’t confirm a
New York Post report from earlier this month that he had also acquired
shares in Herbalife after learning of Pershing Square’s trade, a move that
could help drive the stock up and thereby reduce Ackman’s profits.
“It’s no secret I don’t like Ackman,” Icahn said.
“But that doesn’t mean I am going to go in and buy stock in a company
necessarily just to get him.”
To contact the reporter on this story: Miles Weiss
in Washington at
To contact the editor
responsible for this story: Christian Baumgaertel at
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