Shares of L.A.-based Herbalife jumped after a regulatory filing revealed… (Mark Boster / Los Angeles…)
Herbalife Ltd. shares soared after documents revealed corporate raider Carl Icahn's huge stake in the Los Angeles-based maker of nutritional foods and supplements.
Shortly after the opening bell on Wall Street, Herbalife shares added $4.72, or 12.3%, to $42.99.
A regulatory filing Thursday showed Icahn has paid $214 million for 14 million Herbalife shares, or 13% of the company.
Icahn previously would not disclose whether he had invested in the company. The storied billionaire investor recently squared off, on live television, with fellow New York hedge fund manager Bill Ackman, chief executive of Pershing Square Capital Management.
On Dec. 20, Ackman accused Herbalife of being a pyramid scheme that defrauds distributors of its products. He announced a $1-billion "short" against the company, a massive bet that its stock will fall.
Herbalife shares plunged after Ackman's presentation. The company launched a public-relations counter-attack and accelerated a share buy-back. With Friday's pop in Herbalife stock, the company's shares were trading slightly higher than they were before Ackman's presentation.
That raises the possibility of a "short squeeze," a run-up in demand for a stock that could wind up costing investors like Ackman, who have bet the stock will decline.
The U.S. Securities and Exchange Commission filing said Icahn would discuss with management the possibility of taking Herbalife private or finding new capital.
Icahn believes the company has a "legitimate business model, with favorable long-term opportunities for growth," according to the filing.
Ackman responded to Icahn's stake in a statement Friday:
“We invest based on a careful analysis of the facts. After 18 months of due diligence, we have concluded that it is a certainty that Herbalife is a pyramid scheme. Our conclusions are unaffected by who is on the other side of the investment. Our goal was to shine a spotlight on Herbalife. To the extent that Mr. Icahn is helping achieve this objective, we welcome his involvement.”
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