American investor and business magnate, Carl C. Icahn has bought more shares of multi-level marketing corporation that develops, markets and sells nutrition supplements, weight management, sports nutrition and personal-care products, Herbalife Ltd. (NYSE: HLF), striking nemesis investor Bill Ackman’s short position. According to a new filing, Icahn spent $19.1 million to pick up 372,342 additional shares, roughly 22.9 million shares, making it 24.57% of the shares outstanding valuing $1.2 billion. Soon after, Icahn put out a statement that the board has increased his ownership limit from 25 percent to 34.99 percent. Shares of Herbalife up over 2.5 percent.
According to Yahoo Finance, Chief Executive Officer of $11 billion hedge fund Pershing Square Capital, Bill Ackman has been crusading against Herbalife. In late December 2012, he publicly declared that he was short $1 billion worth of Herbalife and that the stock would go to $0. His thesis centered on his belief that the company is operating as a “pyramid scheme” that targets poor people, particularly from minority populations. He said that regulators, specifically the FTC, would shut the company down.
In addition, Herbalife agreed to pay a $200 million settlement with the Federal Trade Commission and “fundamentally restructure” its business. The Federal Trade Commission alleged in its complaint that most distributors make little to no money and a substantial percentage lose money. The “small minority” of distributors who receive “substantial income” do so through recruiting participants, not actual retail sales. The complaint said the company does “not offer a viable retail-based business opportunity.”