{"id":50139,"date":"2017-11-02T06:07:18","date_gmt":"2017-11-02T06:07:18","guid":{"rendered":"https:\/\/www.biphoo.com\/bipnews\/?p=50139"},"modified":"2017-11-02T06:07:18","modified_gmt":"2017-11-02T06:07:18","slug":"ackman-makes-new-bet-against-herbalife-with-options","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/business\/ackman-makes-new-bet-against-herbalife-with-options.html","title":{"rendered":"Ackman makes new bet against Herbalife with options"},"content":{"rendered":"

Ackman makes new bet against Herbalife with options<\/span><\/strong><\/span><\/h2>\n

Ackman makes new bet against Herbalife with options: The activist investor took a $1 billion bet in 2012 that Herbalife\u2019s shares would fall by selling loaned shares which he hoped to buy back cheaper at a later date.<\/span><\/p>\n

Herbalife\u2019s shares have instead risen since then, partly due to the company aggressively buying back its own stock. On Wednesday Ackman said that the short stock position has been closed. Usually closing out a short position when a stock price has climbed signals that an investor has taken a loss.<\/span><\/p>\n

The move to options caps potential losses he might incur in the future.<\/span><\/p>\n

\u201cWe converted the short stock position and replaced it with outright put positions,\u201d Ackman told Reuters.<\/span><\/p>\n

Ackman is sticking with his negative view on the company but seeking to limit the potential losses for his fund\u2019s investors if he had held onto the short stock position.<\/span><\/p>\n

Ackman said that potential losses on Herbalife will now be limited to 3 percent of the firm\u2019s capital. \u201cWe can still lose money but the loss is capped,\u201d he said.<\/span><\/p>\n

For years, Ackman has said that the company would eventually crumble under regulatory scrutiny for operating what he has called a pyramid scheme, a claim Herbalife denies.<\/span><\/p>\n

Herbalife\u2019s stock price has soared some 50 percent this year and the company has been buying back shares, piling pressure on Ackman\u2019s $10 billion hedge fund as the cost to borrow the shares rose.<\/span><\/p>\n

Short positions, in which borrowed shares are sold in hopes they can be replaced later at a lower price, have the potential for heavy losses that increase as a stock\u2019s price rises. Put options give the holder the option to sell a stock at a set price.<\/span><\/p>\n

Analysts called it a savvy move and a more aggressive bet against Herbalife\u2019s future by limiting losses for his fund and opening the potential for larger returns.<\/span><\/p>\n

Herbalife\u2019s stock price has risen in part by its decision to buy back a big chunk of its shares, a move many in the market interpreted as Herbalife trying to pressure Ackman into giving up on his years-long crusade against the company.<\/span><\/p>\n

Herbalife stock dipped 1.7 percent to $71.37 on Wednesday.<\/span><\/p>\n

Pershing Square International, the firm\u2019s hedge fund portfolio, nursed small losses for the year through the middle of October after logging double-digit losses in 2015 and 2016.<\/span><\/p>\n

The fund reported a 1.5 percent loss for the first six months of 2017. Pershing Square said in its interim financial report that Herbalife was the fund\u2019s biggest loser for that period with a 4.3 percent decline.<\/span><\/p>\n

For much of the last five years, since Ackman first unveiled the position in December 2012, Herbalife has been a thorn for Pershing Square as unrealized losses mounted.<\/span><\/p>\n

While Herbalife has played a major role in Ackman\u2019s portfolio in recent years, Ackman quickly turned back to Automatic Data Processing Inc (ADP.O) where he is campaigning for three board seats. He hosted another webinar on ADP on Wednesday, aiming to underscore his claim that the company is inefficient.<\/span><\/p>\n

Source:http:\/\/www.reuters.com\/article\/us-herbalife-ackman\/ackman-makes-new-bet-against-herbalife-with-options-idUSKBN1D14TL<\/span><\/p>\n

\n\t\t\t
\n\t\t\t <\/div><\/div>\n\t\t