(Reuters)
The bull is now beating the bear.
For the first time since brazenly challenging his fellow hedgie’s theory that shares of nutritional supplement distributor Herbalife were toast, Dan Loeb’s high-stakes bet is worth more.
A 10.1 percent spike in Herbalife’s shares yesterday put estimates of Loeb’s profit on his $285 million bet at $108 million.
Bill Ackman, who on Dec. 19 trashed Herbalife as a pyramid scheme worthy of a regulatory beat down, placed a $1 billion short bet on the company’s stock.
Ackman’s investment — a short of more than 20 million shares — is now just $85 million on the good side, according to estimates, after Herbalife shares are up 69 percent since Christmas.
The rise in Herbalife’s shares yesterday was tied to analyst reports that the company would pre-announce strong earnings this week, moving it closer to an ambitious stock buyback program.
Such a buyback could create an enormous short squeeze of Ackman and his Pershing Square hedge fund.
Herbalife shares closed at $42.50 on Dec. 18, the night before Ackman attacked.
Following the assault, the shares quickly fell 40 percent, bottoming at $26 on Christmas Eve.
Ackman likely paid an average price of $50 on shares that he borrowed, said analyst Tim Ramey of DA Davidson.
Herbalife closed yesterday at $44.08, giving Ackman an estimated gross profit, so far, of roughly $120 million.
But Ramey estimated his expenses totaled $35 million — including $25 million paid to the Ira Sohn Foundation to host the three-and-a-half-hour meeting where Ackman expanded on his pyramid attack.
Loeb bought his 8.9 million shares at an average price of $32.
“The stock is now higher than before Ackman opened his mouth on Dec. 19,” said hedgie Robert Chapman, whose Dec. 31 bullish thesis helped spur the stock. “I’m actually starting to feel sorry for him.”
Ackman did not return calls, and Loeb declined to comment.