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Third Point takes 8.2% stake in Herbalife despite Ackman attack

Thursday, January 10, 2013

Bailey McCann, Opalesque New York: Daniel Loeb's Third Point, an activist hedge fund with approximately $10bn under management has taken an 8.2% stake in Herbalife, a supplement company that Bill Ackman has called a pyramid scheme. In a letter to investors reprinted on the New York Times Dealbook blog, Loeb explains the trade stating that he does not believe that Herbalife is a pyramid scheme, calling Ackman's theory "preposterous."

Pershing Square Capital Management founder Bill Ackman made news when he called the company a pyramid scheme publicly and announced he was shorting the firm. Herbalife is primarily distributed through independent sellers which are incentivized to recruit other independent sellers into the company. Pyramid schemes typically rely on this type of peer-to-peer recruitment structure, but Loeb insists that Ackman's read is incorrect and his accusation that the Federal Trade Commission (FTC) missed this call when the company has been in business for decades is equally unlikely.

According to an account in Bloomberg Businessweek, other analysts seem to be siding with Loeb over Ackman. In the article, Tim Ramey, an analyst with D.A. Davidson & Co. said that he thought Ackman's 3-hour presentation on his short......................

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