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  • Herbalife Manipulation

    It seems that there is a disturbing dynamic in how the anti-Ackmans are trading around Herbalife (NYSE:HLF). Loeb, Soros, Icahn (well, we know his motivations), and now Stiritz, have engaged/are engaging in thinly veiled attempts to manipulate the price of this stock. Loeb, having initialy claimed his Herbalife view was "long-term" value trade, exited after only a few weeks, likely seeing that the potential "short squeeze" upside had been satisfied. Soros's trading activity in HLF is even being investigated by the SEC (no news on this for some time, strangely). (Perry Capital also jumped on board after Soros announced his stake.) Icahn, after all his LBO and buyback bluster, will likely unload his stake once the condition of sale has been satisfied - that Herbalife must trade at a weighted average price of $73 for five days running. Stiritz, charging late in the game, is echoing Icahn's aggressive buyback/LBO yapper. Kyle Bass is another.

    Any rational observer in the investment community surely sees the unsettling nature of this activity. How many of these investors would have shown any interest whatsoever in HLF had it not been for Ackman's aggressive short campaign? Is it a purely personal vendetta against the manager his peers love to hate? Whatever the answer is to these questions, the SEC need to take a long, hard look at what constitutes cooperative action between parties to induce artificial price movements in a stock, given that it's no longer a zero-sum game when there is a counterparty (Ackman) who can be forced to close his position in a short squeeze, in essence providing liquidity to the instigators at a higher price level for all.

    Th number of red flags raised by HLF make it a highly dangerous investment in any case. It would take a true stretch of reasoning to surmise that any of these players would have given it a second look in the absence of potential short squeeze leverage.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Nov 21 11:37 AM | Link | 1 Comment
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