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Ackman pares USD1 billion bet in Herbalife to 40%
On Wednesday, activist investor William Ackman told investors that he reduced his bet on nutritional supplements company Herbalife. He initially placed USD1 billion in Herbalife and would be reducing over 40% of his investment in the nutritional supplements company. The move, according to the New York Times' The Dealbook, was Ackman's move to stem his hedge fund's losses on its investment. Pershing Square Capital Managerment, of which Ackman is the chief executive, reportedly lost hundreds of millions of dollars in Herbalife.
The short position on Herbalife was replaced with stock derivatives. In his letter to investors on October 2, Ackman explained that this would allow his company to short Herbalife stock in the near future. Going short is the practice of selling off financial instruments that one does not owe but intends to buy them back at a deal.
Ackman said in his letter to investors, "Bottom line, we continue to have enormous conviction in our investment thesis." Interestingly, Ackman said in an earlier presentation at a conference that Herbalife is a pyramid scheme or an unsustainable business model akin to a financial scam. Herbalife had since denied Ackman's claims.