Shares of Herbalife rallied after activist investor Bill Ackman said his Pershing Square fund was exiting from its long-held short position on the protein drink maker.
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Ackman told CNBC on Wednesday that he had unwound the position and was building a position in United Technologies, which he said was a “great company.” The CNBC story was posted on Ackman’s personal Twitter account.
Ackman recently announced that he covered his short position on Herbalife to limit his losses as shares of Herbalife continue to rise.
FOX Business reported earlier this month that Herbalife was part of a behind-the-scenes lobbying effort in Congress to pass legislation that would force short-sellers – or investors who bet that stocks will fall – to face similar disclosure requirements as investors who are long, or simply buy a stock and hold it.
In 2012, Ackman announced that he was taking a $1 billion short on the company, which he claimed was a pyramid scheme that would eventually be shut down by regulators. A July 2016 settlement with the Federal Trade Commission required Herbalife to pay $200 million and fundamentally restructure its business, according to a statement on the agency’s website. But the company was not declared a fraud.
The stock of Herbalife has rallied 67% in the past year.
A short position is taken when an investor borrows shares of a stock and immediately sells them with the intention of repaying the borrower at a lower price and pocketing the difference.