The Herbalife Sage Continues – Soros and Icahn Invest Deeper

 

Billionaires George Soros and Carl Icahn bought a combined 5.65 million shares in Herbalife Ltd. (HLF) in the second quarter in a bet that hedge-fund manager Bill Ackman is wrong about the nutrition and weight-loss supplement company.

Soros Fund Management LLC, the investor’s family office, bought a 4.9 percent stake in Herbalife valued at $227.5 million at the end of the quarter, according to a filing yesterday. The company was Soros’s third-largest U.S. stock-listed holding as of June 30.

Icahn added 611,354 shares of Cayman Islands-based Herbalife, bringing his stake to 17 million shares, valued at $765.9 million at the end of the second quarter, according to a separate filing.

Ackman in December said Herbalife operated like a pyramid scheme and his firm, Pershing Square Capital Management LP, has sold short about 20 million shares in the company. Herbalife has repeatedly denied the allegations. Icahn, 77, who bought Herbalife’s shares after Ackman laid out his bearish case, now is the company’s largest individual investor, with a 16.5 percent stake, according to data compiled by Bloomberg.

Ackman’s Herbalife wager had also earlier this year pitted him against rival Daniel Loeb, founder of Third Point LLC, in a public dispute over whether the company is a legitimate enterprise.

Industry Pioneer

Soros, whose firm is based in New York, joins investors including Brookside Capital Management LLC that invested in Herbalife in the quarter. Capital Group Cos., which runs the American Funds, and New York hedge-fund firm D.E. Shaw & Co., also bought Herbalife shares, while Tiger Consumer Management LLC cut its stake.

Herbalife has jumped 77 percent since March 31 and has more than doubled this year.

Soros, an 83-year-old hedge-fund industry pioneer and philanthropist, also took a 9.1 percent stake in J.C. Penney Co. in the quarter, with a market value of $341.4 million at the end of June, yesterday’s filing shows. The family office disclosed a 7.9 percent passive stake in the Plano, Texas-based retailer in April.

J.C. Penney is another investment where Soros’s firm has opposed Ackman. Soros along with Glenview Capital Management LLC told the retailer that they supported the current management team after Ackman criticized the executives in letters last week, people familiar with the situation have said.

Public Sparring

Ackman resigned from J.C. Penney’s board this week after sparring publicly with fellow directors over how to reverse the sales slump that’s dragged down the stock. Ackman has more than $700 million in potential losses on his stake in the department-store chain.

Late last year, Soros asked to pull about $250 million it had invested with Pershing Square because of disappointing returns, according to a person briefed on the matter. The redemptions are staggered over several quarters and will be complete next year.

Soros’s firm sold its position in the SPDR Gold Trust, an exchange-traded fund that tracks the yellow metal, valued at $82 million at the end of March, and its holding in Market Vectors Gold Miners ETF, worth $100.9 million.

It also sold its 7.84 million shares of US Airways Group Inc. (LCC), valued at $133.1 million at the end of the first quarter. The shares have fallen 14 percent since the U.S. Justice Department sued to bar the merger of the airline with AMR Corp., the operator of American Airlines, earlier this week.

 

Source: Bloomberg