The battle for Herbalife has begun

Shares of Herbalife (HLF) were up almost 4% Wednesday after CNBC reported that activist investor Dan Loeb took an 8.24% stake in the multi-level marketer -- the same company that well-known short-seller Bill Ackman has argued is a "pyramid scheme."  

Loeb, best known for his bet on Yahoo (YHOO) and Greek bonds, Wednesday reported that his Third Point hedge fund owns 8.9 million shares of Herbalife, according to a filing with the Securities & Exchange Commission. Contrast that with Ackman's Pershing Square, which has a short position of more than 20 million shares in the seller of nutritional supplements and personal care products.  The SEC has also opened an investigation into the company, according to the Wall Street Journal.

Herbalife declined to comment on Loeb and the SEC probe. Executives are scheduled to make a presentation to Wall Street analysts Thursday to refute Ackman's charges, which the company described as "a malicious attack on Herbalife's business model based largely on outdated, distorted and inaccurate information." Third Point  couldn't be reached.

"The goal of our December 20th presentation was to shine a spotlight on the company so that the world better understands the facts about Herbalife," Ackman said in a statement. "The outcome of this investment is not about Pershing Square or anyone else who is long or short the stock.  To the extent another investor, long or short, brings additional sunlight to the situation, we welcome them."

Herbalife, based in the Cayman Islands, has been dogged by controversy for years. Founder Mark Hughes died in 2000 following an accidental overdose of alcohol and anti-depressants.   His estate has been involved in numerous legal battles since then. Nobel Prize winner Louis Ignarro came under fire from Bloomberg News in 2004 for touting an Herbalife supplement in a scientific journal without disclosing his financial ties to the company. David Einhorn, another short seller, spooked the stock market last May when he raised questions about the company's finances.

Most Wall Street analysts remain bullish on Herbalife. The average 52-week price target on the stock is $71.43, more than 80% higher than where it currently trades. Herbalife, however, remains risky. Investors were rattled last month after Herbalife said it hadn't used $950 million of the $1 billion it had authorized to buy back shares because of "trading restrictions," as Reuters noted.

--Jonathan Berr does not own shares of the listed stocks. Updated at 2:08 pm to add comments from Ackman and at 3:59 p.m. to add report of SEC probe. Follow him on Twitter @jdberr

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