Bill Ackman, the hedge fund manager who has for years been in a battle to destroy health foods company Herbalife, has recently invested in more than 99 million shares of Mondelez International, the company that make Oreo cookies and a number of other “junk” food products. Pershing Square Capital Management, Ackman firm, has invested one billion dollars in a short position in the stock of Herbalife, and since 2012, has worked tirelessly to convince the world Herbalife is running a scam in the sale of its health and diet related products.
But even worse, Ackman is using crony capitalism in his effort to take down Herbalife for his own financial benefit. In announcing his public short on the stock of Herbalife on Dec. 13, 2012, Ackman placed a bet on that stock declining in value. After a three and a half hour presentation, in which Ackman called Herbalife the “best-managed pyramid scheme in the history of the world,” a few days later the company’s stock declined from $41.57 per share to $24.24 per share. At the same time, other hedge fund investors have increased their stake in Herbalife stock, betting against Ackman.
As he has continued his war against Herbalife, Ackman has turn to friends in high places – government – to help him bring down the health foods company. He has presented his claim Herbalife is a pyramid scheme to anyone in government who will listen, demanding they use their authority to investigate the company. Any investigation announce would bring Herbalife stock down more, he believes.
Ackman even went so far as to pay $3.6 million in 2014 to a whistleblower to submit information to the government against Herbalife. Ackman has also convinced a U.S. Senator, three members of Congress and seven State Attorneys General to pressure the Federal Trade Commission (FTC) to investigate Herbalife. He has also hired lobbyists, paid for web sites as well as soliciting nonprofits organizations to aide him in bringing down Herbalife.
If Ackman succeeds in destroying Herbalife, he will profit greatly from his $1 billion short position on the company’s stock. But Ackman has spent $90 million in his war against the company, and has failed to prove the company operates illegally. He has also failed to destroy the company in his quest to profit from its demise.
Progressives aren’t big fans of Bill Ackman either. Posting on The Daily Kos, Wendy Crosby wrote, “Hedge fund billionaire Bill Ackman is the poster child for what is wrong on Wall Street.” Crosby further pointed out that Ackman has made money for himself and investors via price gouging of drugs, and the war he’s waged on Herbalife, a company Crosby points out “serves communities that employ scores of middle and low income Americans.”
Ackman has invested $4 billion in the drug company Valeant, which Senator Claire McCaskill (D-MO) says, “Valeant is the company that perfected this model of strategic acquisitions and price hikes that made it Wall Street’s dream come true… That is not social good. That is social bad.”
Ackman, who lives “the life of a king” has an office on the 42nd floor of a building in midtown Manhattan and recently purchased a $92.5 penthouse just to the East of that building, is what Crosby calls “a progressive charlatan.”
He’s admitted he make a mistake with Valeant, and he hasn’t done well with other companies like Chipotle either. Many would say he has really gone wrong with war against Herbalife as well. If Ackman wants to do what’s right, he sell out his stake in Mondelez before he ruins Oreos, and cut his losses in his billion dollar bet against Herbalife before he stands to lose even more.