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Herbalife Ltd. Message Board

  • alwalstrom alwalstrom Feb 15, 2013 3:55 AM Flag

    The Numbers

    Here is why this will be the biggest short squeeze in history

    Float 100 million shares
    Ackman 20 million shares short
    Other 15 million shares short
    Ackman shorted from a range of 45-52 and he says he paid 1 Billion on HLF. Lets just say he took a average of 48.5 or the middle of that range he was shorting. 2 million shares * 48.7 = 970 million. Lets say he took that other 30 million and hedges his bet on CALLS. The problem here is even if he hedged he still would not have hedged enough to back up 20 million shares short. look at the open interest in FEB, MARCH, MAY AUG, Jan 14, JAN 15 CALLS. It is impossible for him to have even hedged 3-4 million shares of his short position.

    Why is that possible /? Because we now know Icahn has 13 percent of this stock, however only 2.4 million shares out of the float of 100 million. So that leaves him with around 10.6 million shares in CALLS or 106000 contracts. If you look at the open interest he might own more then 60 percent of all CALLS.

    When Ackman let his position be known it was the worst mistake in his investing history. So this is hypothetical. lets say this goes to past his original investment at 48.5. His losses could be catastrophic. At 97 he would have lost 1 billion with absolutely no way to cover 20 million shares. If this stock zooms up fast he is completely stuck on taking HUGE losses for his clients and in turn they will start bailing.

    Ackman is just totally screwed . There is no way out of it. There is no way you can cover that many shares even in a week. The faster this goes up in low volume it is going to magnify the short squeeze due to investors have not had the proper time to cover with so many shares short.

    with Icahn revealing his position his next move is going to be to buy up another 5-7 million shares of common stock creating a vacuum effect on the shorts / just like NF:X.

    The kicker to all of this is earnings ..
    With icahn in you know they are going to beat now as well. He probably has studied every aspect of this stock and will have 4 moves.

    1st Announce a big position causing the stock to rocket

    2 HLF announces a blow out quarter

    3 HlF announces another stock buyback

    4 Ackman capitulates

    With all 4 events happening it could be the biggest short squeeze ever

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    • good analysis!
      I too dont see why Ackman handled this the way he did. And his biggest problem may be his LP's start pulling out of his funds en mass. Between trying to cover his shorts with HLF and dealing with irate LP's he has put his entire business at risk. and for what? his motives just never made sense to me..still dont. his whole thesis revolves around the Federal Govt jumping when he snaps his fingers (hello!)=major assumption!

 
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