To paraphrase the late US Sen. Everett Dirksen of Illinois: “A billion dollars here, a billion dollars there—pretty soon you’re talking about real money.”
That’s why investors, analysts, journalists and CEOs all tend to listen to activist investor Bill Ackman: He can throw around $1 billion at a time, and it is very real money. Right now, for example, he’s got a $1 billion short position on Herbalife, betting that the multi-level-marketing company’s shares eventually will be worthless.
But for today, at least, there’s reason to doubt the acumen of Ackman on Herbalife, a marketer of weight-loss shakes and skin lotions that he has condemned as a pyramid scheme. The company beat analysts’ expectations about its quarterly earnings again this week and raised its full-year outlook, as well as celebrated the growing influence of Carl Icahn, an old-school corporate raider who’s increased his stake in the company and publicly defended it against nouveau gadfly Ackman.[more]
“The proof is in the results,” Herbalife President Des Walsh told the Los Angeles Times. “Ultimately people will realize that Bill Ackman’s reckless bet is based on an unfounded hypothesis. The resilience of our customer base and our distributor base will continue to show that he’s wrong and dead wrong.”
As head of Pershing Square Capital, Ackman has made other CEOs and board members similarly nervous, cranky or reassured, depending on his perspective, at brand after brand that he has targeted either on the long or short side, also including JCPenney and Procter & Gamble.
However, since he famously made a killing before the 2008 financial crash by shorting subprime mortgage-bond insurer MBIA, Ackman’s record of predicting brand arcs has been checkered at best. He had a sizeable stake in the now-bankrupt bookselling chain, Borders. Of course, he bet big on JCPenney and helped engineer the arrival of Apple retailing guru Ron Johnson as CEO last year; but everyone knows how that has worked out—the stock has been so battered under Ackman’s influence that equally infamous profiteer George Soros came in and swooped up his own chunk of Penney.
Ackman’s work with P&G has been more mixed than any of the above. He’ll argue that his purchase of a significant stake in the sluggishly performing CPG giant last year was a main factor in some sweeping changes by CEO Bob McDonald, which have begun to pay off significantly in improving the company’s performance—but not yet, perhaps, convincingly.
Other intriguing holdings among Pershing Square’s 10 largest are positions in Burger King and Mondelez International. Burger King is tweaking its menu these days under pressure from an American public that has been cutting their QSR visits, while Mondelez has been activating its ambitious plans for global snack brands such as Oreo after breaking away from Kraft Foods last year.
One thing is for sure. Whether he’s for you or against you, Ackman’s name is not one that any CEO wants to show up in a report on his or her desk these days.