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Carl Icahn: Herbalife ‘gave me a lot of gas,’ but I might buy more shares

Billionaire investor Carl Icahn speaks on Fox Business. (Reuters/ Brendan McDermid)
(Reuters/ Brendan McDermid)

Billionaire Investor Carl Icahn doesn’t like drinking Herbalife shakes, but that’s not stopping him from trying to buy even more shares of the multi-level marketing company’s stock.

“They make some good products, I believe. I personally don’t like the drink. I drank it, gave me a lot of gas. I didn’t like it,” Icahn said. “But a lot of people love the damn drink.”

Speaking at the CNBC Delivering Alpha Conference, Icahn said he thinks Herbalife’s (HLF) model works and he’s “not just playing games buying the stock.”

He then dropped some news that he’s requesting to massively increase his ownership limit, while also making a dig at his long-time rival Bill Ackman, the CEO of Pershing Square who’s famously short the stock.

“I think I know markets. And as far as I’m concerned, I think no one—I don’t want to say it in a bad way about Ackman—no professional would really want to be short a company where you have 92 million shares outstanding and 28 million short and of those 92 [million] I own 19, 20%. I’ve got permission to own 35%. And here’s a little secret for your show. I’ve asked permission, I’ve gone to the FTC to get accelerated treatment for the right to go to 50% , which is going way up.”

He added that a short-seller wouldn’t touch a company like that with a 10-foot pole, raising the question, “What if somebody does a tender offer?”

CNBC’s Scott Wapner then asked if he’d do a tender offer. He said he’d “consider it.”

“It’s something I thought about. Doesn’t mean I will. I think other people might. I certainly think Herbalife is a candidate to go private. Frankly, wearing my shareholder hat, I think Herbalife is a lot better off going private and getting away from this Ackman-type criticism. I mean Ackman is out there driving everybody crazy, which is his right to do. He’s obsessed with this.”

Herbalife comes in containers that look like this
Herbalife comes in containers that look like this. (Image: Flickr)

In mid-July, Herbalife agreed to pay a $200 million settlement with the FTC and “fundamentally restructure” its business. The FTC alleged in its complaint that most distributors make little to no money and a substantial percentage lose money. The “small minority” of distributors who receive “substantial income” do so through recruiting participants, not actual retail sales. The complaint said the company does “not offer a viable retail-based business opportunity.”

In a statement that day, Icahn, the largest shareholder, announced that the board has increased his ownership limit from 25% to 34.99% of shares outstanding. He also noted that the investigation “concluded that Herbalife is not a pyramid scheme.”

A week later, Ackman contended this was an attempt by Herbalife to “manipulate the stock price higher.” More recently, Ackman made comments on CNBC that Icahn was getting out of the stock.

After the CNBC comments, Icahn bought another 2.5 million shares.

“To tell you the truth, I wasn’t mad,” Icahn told CNBC’s Wapner at the Delivering Alpha Conference discussion.

“You bought more than 2 million shares that day just for a goof?” Wapner asked.

“Well, the stock was down 10 points, wasn’t it?” Icahn shot back.

“I guess they thought you were getting out,” Wapner noted.

“Maybe he did me a favor and got it down 10 points. Did you ever think of that?” Icahn asked, before the audience burst into laughter.

“You did consider getting out,” Wapner added.

“Is that a question or a statement?” Icahn asked, before adding, “You know I’m not going to answer it. Why don’t you go to the next one.”

For more than three-and-a-half years, Ackman has been crusading against Herbalife. In December 2012, he publicly declared that he was short $1 billion worth of Herbalife and that the stock would go to $0. His thesis centered around his belief that the company is operating as a “pyramid scheme” that targets poor people, particularly from minority populations.

Icahn — Ackman’s long-time nemesis — disagreed with Ackman’s thesis, and piled on by going long the stock.

Icahn has said Ackman would be the victim of the “mother of all short squeezes.”

Ackman has said that regulators, specifically the FTC, would shut the company down. That didn’t happen, but he said in July he thinks the company will go out of business once it implements the changes mandated by the FTC.

Julia La Roche is a finance reporter at Yahoo Finance.

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