Market Cap 4.2 Billion. Somebody help me out here.
I am not the smartest guy in the world. No jokes please. Anyway the market cap on Yahoo is 4.2 Billion. With the company buying back up to 1 billion in shares and Ackman shorting 1 billion in shares. Do half of the outstanding shares have to be bought my these 2 groups?
Problem is Herbalife has no net cash after debt. They would have to go into debt to buy back shares. The only reason why Herbalife was buying back shares was to prop up the share price so that insiders could unload to the tune of $90 million.
If the company could buy back 20 million shares at $50 and the combined hedge funs owning probably 30% and long tern investors (people holding past $70) is another 20% that means that Ackman would have to compete with new hedge funds entering the market and retail longs, etc.. for 30% of the float. Same thing happened in Volkswagen on Oct. 28 2008 when it was announced that Porsche owned something like 70% of the float and chaos pursued with the price going from 250 euros to 1006 euros in one day! That would be like us going to 160-200 in one day. Ackman would be bankrupt as would any brokers that lend out shares. If you shorted let's say 5k shares at $50 and couldn't cover to $150 you would lose 500k. Now maybe you don't have that money then Etrade, Ameritrade, etc. would have to eat it and sue you over it. Could be huge loses to any of the bigger brokers. This could get ugly as people fight over 30% of the float. Not looking good for Ackman, imo