Last Friday, hedge fund manager Carl Icahn significantly reduced his stake in Herbalife Ltd., causing shares in the Los Angeles-based nutritional company to plunge 9.6 percent. According to a securities filing, Icahn’s fund, Icahn Enterprises (IEP) said it was tendering up to 11.4 million of Herbalife shares, making an approximate 25 percent divestiture of the 45.7 million shares it currently owns.
“For almost six years, we have been one of Herbalife’s strongest, most loyal supporters,” Icahn wrote in a statement. “We stood by the company through a half-decade-long short-selling campaign; and we never sold a share, even after our investment doubled. But, given that our Herbalife investment has become an outsized position, representing approximately 24 percent exposure to total NAV (new asset value), it is only prudent for IEP to reduce its exposure.”
Icahn will remain Herbalife’s largest shareholder. Out of the 29 long-quiet positions IEP currently holds, only three have been longer than Herbalife.
Icahn had a much-publicized battle with billionaire hedge fund manager William Ackman, who launched a campaign against Herbalife in 2012. Ackman’s Pershing Square Capital contended the direct seller was an illegal “well-managed pyramid scheme” and backed those claims with a $1 billion short position. On Feb. 28 of this year, three months after he closed out the short position and converted it into a bet using put options, Ackman exited his bet against the company. Throughout the battle with Ackman and a lengthy investigation by the Federal Trade Commission, Icahn stood by Herbalife.
Herbalife closed last Friday at $48.70, reflecting a 43.8 percent return year-to-date and a 36.4 percent increase over 12 months, sharply outperforming the S&P 500’s 1.8 percent gain and 12.7 percent growth over the same respective periods.