By Svea Herbst-Bayliss and Katya Wachtel
NEW YORK, Feb 13 (Reuters) - 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 matter.
“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 conference.
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 hours.
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 matter.
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 said.
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 possible.
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 next.”