Herbalife shares see mysterious rise
The stock has been volatile in the high-stakes battle over the multi-level marketer.
Herbalife, based in the Cayman Islands, rose more than 8% at midday Monday to $43.57. The stock has surged more than 30% since the start of the year. There doesn't appear to be any news that could account for the gain, so it could be a short squeeze, which is bad news for investors such as Ackman who profit when stock prices fall.
Wall Street analysts remain bullish on Herbalife. The average 52-week price target on the stock is $62.29, more than 40% higher than where it currently trades. Sentiment on the stock, though, could easily change depending on the outcome of the SEC probe.
Ackman's campaign has had an impact. According to StreetInsider.com, Herbalife had the largest gain in short interest of any stock on the New York Stock Exchange between Dec. 14 and Dec. 21. Ackman, who has also made a huge bet that struggling retailer J.C. Penney (JCP) will rebound, remains undeterred and has said he thinks the stock's price will go to zero. A presentation his Pershing Square Capital Management firm made about Herbalife minces no words.
"Pershing Square believes Herbalife is a pyramid scheme because, among other reasons,
distributors earn more than 10 times as much from recruitment as they do by selling the
company’s overpriced products to bona fide retail customers," it says.
Another activist investor, Daniel Loeb of Third Point, has called Ackman's short thesis "preposterous" and last week disclosed that his firm, which has also made big bets on Yahoo (YHOO) and Greek bonds, owned an 8.2% stake in Herbalife.
Ackman or Loeb will either win or lose big with Herbalife. There will be no middle ground.
--Jonathan Berr doesn't own shares of the listed stocks. Follow him on Twitter @jdberr.
More on Money Now
Copyright © 2014 Microsoft. All rights reserved.
[BRIEFING.COM] The headlines generally favored Tuesday being another good day for the stock market. Instead, it was just a mixed day with modest point changes on either side of the unchanged mark for the major indices.
For the most part, the stock market was a sideshow. The main trading events were seen in the commodity and Treasury markets, both of which saw some decent-sized losses within their respective complex.
Dollar strength was at the heart of the weakness in ... More
More Market News
The S&P 500 manages to keep a deathgrip on 2,000, but key areas of the market are already buckling under pressure.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'