Ackman on JCP, HLF it doesnt end!

[indythinker85]

http://thenypost.files.wordpress.com/2013/10/3q13-investor-letter.pdf

[WideMoat]

"In order to mitigate the risk of further mark-to-market losses on Herbalife, in recent weeks we have restructured the position by re

ducing our short equity position by more than 40% and replacing it with long-term derivatives, principally over-the-counter put options. The restructuring of the position preserves our opportunity for profit–if the Company fails within a reasonable time frame we will

make a similar amount of profit as if we had maintained the entire initial short position–while mitigating the risk of further substantial mark-to-market losses–because our exposure on the put options is limited to the total premium paid. In restructuring the

position, we have also reduced the amount of capital consumed by the investment from 16% to 12% of our funds."

 

I'm sure it was painful, but good move Mr. Ackman.

[gg]

I imagine that when Ackman was buying these put options, his counterparties were hedging and probably buying either common stock or OTM call options. This might explain some of the upward move in HLF's stock price over the past weeks/months

[siddharth18]

His tone has certainly changed over the last year. Back when there were talks of LBO (and HLF was trading around 35), he said ICahn wouldn't possibly pay price in the high 50's or 60's given the "risks" associated with the company.

 

Now he says HLF won't be able to raise money at 4%, or that no bank would possibly underwrite $3B of debt issue or that HLF won't maintain its current earnings multiple if it raises $3B or that the buyback won't generate any shareholder value.

 

I think this is something that is (or should be!) abundantly clear for anyone who has followed Ackman: He won't go away.

 

Regardless, I think those that are waiting for a synthetic price movement due to an impending (the mother of all?) squeeze are exposed to the perennial business risk HLF faces.

 

At a $35 price point (as late as August), one just had to believe that the company wasn't going away overnight with it being around for 30+ years, having a strong lobby, diversified international revenue base, Icahn by your side and a you had some comfort in being a contrarian.

 

Holding at $70 is a completely different story. The consensus view has fundamentally shifted, and everyone seems to think that Ackman has failed, that HLF is legit and the only way foward for the stock is UP and UP. And trouble usually starts to brew when EVERYONE thinks something's going to happen.

 

The dynamics of the vicious machine, that is the market, are not always manifest, are often under-appreciated, and almost never are as simplistic as they are portrayed. Someone said it best early this year - Ackman can be right and still be broke. By reducing his stock-based short and initiating a derivative based short he is more or less acquiescing that his initial game plan wasn't as successful as though and there is a very real possibility that it would backfire on him.

 

And let's not forget - the onus is on HIM to bring about change, action and eventual halt to the ostensible pyramid scheme. He's fighting an uphill battle against - Herbalife's corporate stash, their world-class lawyers, lobbyists, advisers, political connections, all who have imprimatur of the God father in this saga - Carl Icahn, and, to a smaller extent - Soros.

[indythinker85]

New interview

 

The Short-Seller Stands Tall

William Ackman: ‘You Need a Thick Skin to Be in This Business’

 

http://www.nytimes.com/2013/10/06/magazine/william-ackman-you-need-a-thick-skin-to-be-in-this-business.html?partner=rss&emc=rss&_r=1&