Soros takes a large stake in Herbalife, shares rise

Herbalife shares advanced to a new 1 year high yesterday after news that billionaire investor George Soros had taken a large stake in the nutritional supplement seller.

Last month the $13 billion hedge fund run by Bill Ackman, has called Herbalife a fraudulent pyramid scheme and placed a billion-dollar bet against the value of its shares. The hedge fund piled on losses of hundreds million of dollars after Herbalifes shares rose 9% to $65.

Herbalife, which has said it is a legitimate business that has been operating for 33 years, sells products such as weight-loss shakes and vitamin pills in countries around the world through a network of self-employed salespeople it calls distributors.

Mr Soros, one of the most successful investors of all time, is the second retired hedge fund manager to back the company. He joins Carl Icahn, a veteran agitator and bitter rival of Mr Ackman, who has taken a 16.5% stake in the group, worth $1.1 billion. Mr Icahn has also appointed two representatives to Herbalife’s board.

This could be Carl Icahn taking large bullish position in Herbalife just for personal vendetta against Bill Ackman, who is enormously short the vitamin marketing company, or is that a legitimate bullish bet by the billionaire investor? Both businessmen entered into a dispute recently on CNBC television which ended by the two men trading insults. It looks like it is just personal, with Icahn trying to smoke Ackman out of his 20 million short position in just a few months despite both billionaires stated otherwise.

The share price has recovered this year, before jumping more than 9% on Wednesday after the television broadcaster reported that Mr Soros had taken a large position in the company. Mr Soros did not immediately respond to requests for comment. It follows the release by Herbalife of second-quarter results on Monday, the first since it appointed PwC as its auditor following the resignation of KPMG because of an insider trading scandal in April.