Icahn Squeezes Ackman With Big Stake In Herbalife

Update Feb. 15: Bill Ackman issued the following statement in response to Icahn�s stake Friday morning:

After Carl Icahn went toe-to-toe (or voice-to-voice as it were) with Bill Ackman on CNBC January 25, it seemed a foregone conclusion that the billionaire had a long position in Herbalife that opposed his rival�s massive short bet.

The details came out Thursday, when Icahn disclosed a 12.98% stake in Herbalife, a holding of just over 14 million shares (including shares underlying call options).

With Icahn now in play, billionaire hedge fund managers control more than 20% of Herbalife�s shares; Daniel Loeb�s Third Point revealed an 8.24% stake January 9. (See �Loeb Calls Ackman�s Short Thesis �Preposterous��)

The stock popped more than 20% in after-hours trading to $46.09, setting the stage for further pressure on short sellers Friday.

As for questions about things not being personal: Icahn had just 1.6 million shares of Herbalife before the bitter battle in the public eye, according to the Journal.

During the CNBC fight, Ackman told Icahn he is free to buy the company if he is so convinced it is not a pyramid scheme. Now it looks like Icahn may just take him up on that. From the filing:

The Reporting Persons have concluded that the Company has a legitimate business model, with favorable long-term opportunities for growth.  The Reporting Persons intend to have discussions with management of the Issuer regarding the business and strategic alternatives to enhance shareholder value, such as a recapitalization or a going-private transaction.

Ackman, whose Pershing Square has a short position of some 20 million shares, addressed the Herbalife situation at the Harbor Investment Conference in Manhattan Wednesday.

The company, set to issue fourth-quarter numbers next week, has not responded to questions Ackman raised following its rebuttal to his Dec. 20 presentation, and the hedge fund manager said any business that is not a pyramid scheme could answer such questions within 24 hours.

As for the televised spat he had with Icahn, Ackman spun the headline-generating segment as a successful effort at getting more publicity focused on Herbalife, which he hopes will inspire more regulatory scrutiny. He also said that while investors � like Loeb � might be able to make money with a quick flip of the stock, he still believes that ultimately Herbalife will not last.

One of the challenges of short selling � and a reason Pershing doesn�t do a ton of it � is the fact that suggesting a stock should go down is wildly unpopular, Ackman said (the infinite downside is another reason to short sparingly). But he also compares Herbalife to his previous short crusade against MBIA ,which paid off in a huge way when the bond insurer cratered during the financial crisis.

The question on the minds of many is how much patience Ackman�s investors will have if the trade � said to be a billion-dollar position � keeps moving against him.

Bill Ackman