By Svea Herbst-Bayliss and Katya Wachtel
NEW YORK Feb 13 Hedge fund manager William
Ackman, who has called nutritional supplements company Herbalife
Inc a pyramid scheme, said the biggest risk in shorting
the company was whether regulators would take time to focus on
"The risk in shorting this company was whether we could get
the world to focus on it," Ackman said at the Harbor Investment
Conference. "Could we get the SEC, the FTC and the regulators
around the world interested?," he asked.
Ackman, whose $12 billion Pershing Square Capital Management
said in December that it was making a rare short bet against
Herbalife, has faced a whirlwind of questions about the bet ever
since and he touched on it again on Wednesday at the investment
He criticized the company for not responding quickly enough
to a series of questions that the New York-based hedge fund has
asked about its operation. Ackman said any other company could
have answered his questions, which he called "basic," within 24
As the battle drags on, Ackman said he has taken some solace
from the fact that the FTC recently shut down a similar company,
Fortune High Tech.
"If the FTC misses Herbalife, it would be like the SEC
missing the (fraud perpetuated by) Bernard Madoff," Ackman said.
The SEC is also looking into the matter.
"All it takes is one regulator to look at this," Ackman
added, noting that there are state regulators, foreign
regulators and plenty of others who could take the lead on the
He also said that the publicity associated with the battle
is starting to have an effect and that it could be visible in
Herbalife's first-quarter financial numbers, which are expected
to be released soon.
"The right outcome will come from transparency," Ackman
Even the much publicized grudge match on CNBC between Ackman
and Carl Icahn, who has reportedly taken a long position in
Herbalife, has had been beneficial to his cause, Ackman said.
The investors who took long positions helped focus the
world's attention on the matter, Ackman said, adding: "so thank
you Carl Icahn, thank you Dan Loeb ... There is nothing wrong
with someone taking the opposing view,"
He added, however that he does not think that people can
make money in the long term even though short-term gains are
During his investment career, Ackman has not been involved
in many shorts, where an investor bets that the stock price will
fall. The most noteworthy was his bet against mortgage insurer
MBIA Inc, which took years to play out.
But this time there will be a quicker resolution, Ackman
predicted, adding that it helps that his own stature is far
bigger now than when he bet against MBIA.
Besides discussing Herbalife, Ackman also spent time
discussing J.C. Penney Co Inc, the embattled retailer
which is a big holding for Pershing Square.
"The stock prices says we are not going to succeed," Ackman
said, noting that he obviously disagrees.
Overhauling the company's stores, beefing up its products
for the home and adding clothing company Joe Fresh to the JCP's
lineup should all change the outlook on the company, he said.
After the home offerings are overhauled and Home and Joe
Fresh is launched, the company will "likely reach a
tipping-point level," Ackman said. "If it doesn't work, the
company will stop, take a breath and figure out what to do