Do you also remember when Gasparino reported that Ackman cried foul and was pressing the SEC to investigate Paul Sohn, George Soros and others over the manipulation of Herbalife's stock price because they were participating in "idea dinners"? As reported by Juliet Chung, Emily Glazer and Gregory Zuckerman Ackman was across the table from Sohn and others at the very idea dinner he was complaining about. He wasn't just at the idea dinner noshing on wagyu, he was actively trying to convince them that Herbalife was a great short because it was an illegal pyramid. What was also reported in the WSJ article was that at that very dinner that Bill Ackman claims to have been the epicenter of the purported Sohn/Soros insider trading, Ackman was discussing a letter Representative Linda Sanchez had sent to the Chairwoman of the FTC, asking that Edith Ramirez investigate Herbalife. This was the ace hidden up Ackman's bespoke sleeve. The problem for Ackman and Rep. Sanchez is that Sanchez drafted and dated the letter as June 5th, but the FTC hadn't received that letter until June 7th at 8:32 am. It is unclear from the WSJ article whether Ackman received the letter on June 5th, but you can go to the Pershing website and see for yourself that Rep. Sanchez's letter was received by Pershing no later than the afternoon of June 6th, while the market was still open. Later that very day more than 12 hours before the letter was even stamped as received by the FTC's Special Congressional Correspondence Branch, much less actually given to Edith Ramirez, Ackman was shopping it around as a reason to short Herbalife. It wasn't until the morning of Thursday June 13th that Pershing took Sanchez's letter live on their site after Ackman's #besty over at the NY Post finally published an article about it. If Ackman was chided as a youth for having his elbows on the dinner table, I can only imagine what his mother would think of him using inside information as his dinner napkin. Aside from the generally poor form of lodging manipulation and insider trading complaints against the dinner companions to whom you just passed the bread sticks, one sure fire way to get a bottle of Palmer Margaux chucked at your head is to hurl insider trading complaints after dessert and digestifs. When most people would have at least been pretending to reach for their Amex while Dave Mazzullo emphatically insisted on picking up the tab, Ackman was probably contemplating how many of his dinner companions were going to borrow Herbalife shares in the coming days. A drooling half-wit groundling like myself can still easily conclude that Ackman and anyone that shorted Herbalife between June 5th and June 12th as a result of Ackman showing them this non-public letter from a member of the U.S. House of Representatives may have participated in activities that could constitute illegal insider trading and stock manipulation by forming what Pershing's Counsel would claim creates a "common group" under securities law (but only if you're long apparently) that was acting on non-public information.
It gets better for Ackman though. In Bill Stiritz's 13D filed yesterday there is an interesting passage under Item 4:
Purpose of Transaction.The Reporting Person has analyzed the Company and concluded that it has a sound business model, a strong distribution system and a positive outlook for long-term growth opportunities. The Reporting Person believes that the Company’s market capitalization is undervalued at this time. The Reporting Person plans to interact with Company management to offer them, for their consideration, his views, advice and counsel for ways of promoting and furthering the Company’s shareholder interests. The Reporting Person’s views, advice and counsel may address a wide variety of matters, including ways to further leverage the Company’s strong distribution system, potential financing and/or recapitalization strategies, potential stock repurchase programs, and potential strategies for confronting the speculative short position that currently exists in the Company’s stock and its attendant negative publicity campaign. The Reporting Person may, from time to time (i) acquire additional Shares and/or other equity, debt, or other securities of the Company, (ii) dispose of any or all of his Shares or any other such Company securities, and (iii) engage in hedging or similar transactions with respect to the Shares. (I added emphasis)It is also interesting to note that in Bill Stiritz' 13D it states that he sold a variety of over the counter puts, including Jan 2015's. Wait a second! That's when Ackman's puts expire. I can't help but wonder if because back in September Stiritz was selling OTC Jan 2015 puts while Ackman was buying them (under the false flag of his disclaimer), whether or not Herbalife's largest individual shareholder has some sort of claim against Ackman with respect to manipulating the price of Herbalife stock as well as the OTC puts they were both dealing in? Maybe one potential strategy for "confronting the speculative short position" is to take a page right out of Ackman's playbook. Wouldn't that be a kick in the face if while Stiritz is taking Herbalife private he'll also write a nice long letter to Liora Sukhatme in the SEC's NY Office that requests that she and her team investigate Bill Ackman, Pershing Square et al for manipulating the price of the Herbalife securities the two parties are currently linked by. If Ackman's year continues to play out as it has thus far, Herbalife and its shareholders may send him from running his attendant negative publicity campaign to bathroom attendant at Del Frisco's Double Eagle. Towel sir?
Nice post.
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