Icahn Buys More Herbalife (HLF) Shares After Ackman Attack

Activist investor, Carl Icahn has purchased an additional 2.3 million shares of Herbalife Ltd. (NYSE:HLF) after Friday’s market close, raising his stake in the company to as much as 35%, contradicting what billionaire Bill Ackman reported to media sources. However, the stock declined on Aug 26.

Shares of the supplements and weight-loss products company slumped 2.31% on Friday, after hedge fund manager, Bill Ackman reportedly stated to CNBC early Friday that Icahn considered selling his stake in Herbalife, worth approximately $1 billion, to a consortium that included Ackman.

According to sources, earlier in August Ackman stated that Icahn was interested in selling off his stake and was therefore looking for buyers, in anticipation of good returns. Icahn said in a statement on Friday that he never directly put in a sell order.

In fact, he hit back harder at Ackman by buying more stake in the firm, thus signaling his loyalty toward the company.

HERBALIFE LTD Price and Consensus

HERBALIFE LTD Price and Consensus | HERBALIFE LTD Quote

Icahn and Ackman have been battling over Herbalife for years. Icahn's position in Herbalife is worth more than a billion dollars, shares which he started accumulating in late 2012. Ackman, on the other hand, took a short position in the company in late 2012. He claimed that the company is running a pyramid scheme, which involves making money by way of recruiting more salespeople rather than selling products. Such models are illegal because they eventually collapse once there are no more people to recruit.

Herbalife, on its part, has been denying the charges from the very beginning. The company clarified that it operates like a multi-level marketing company, similar to Nu Skin Enterprises Inc. (NYSE:NUS) , USANA Health Sciences Inc. (NYSE:USNA) and Avon Products Inc. (NYSE:AVP) .

However, Ackman's back-to-back allegations prompted a civil investigative demand in 2014 by the U.S. Federal Trade Commission (“FTC”) related to the company’s marketing practices. Nevertheless, in mid-July, Herbalife reached a settlement with the FTC, which stated that the company is not a pyramid scheme. Nonetheless, the company agreed to pay $200 million as penalty charges. The FTC had charged that Herbalife's earnings potential claims were deceptive and its compensation structure hinged on recruiting other product distributors instead of selling capability.

Nevertheless, Herbalife has remained upbeat about its prospects. The company reported better-than-expected second-quarter 2016 results on the back of higher sales and improving volume trends. Management also raised its view for full-year 2016.

Herbalife currently carries a Zacks Rank #2 (Buy).