Daniel Loeb's Third Point LLC reported an 8.2% passive stake in
embattled nutritional-supplement maker Herbalife Ltd. (HLF), a day
before the company hosts an analyst and investor meeting to rebut
allegations it is operating a pyramid scheme.
Shares of Herbalife jumped as high as $41.90 following word of
Mr. Loeb's position and were briefly halted. The stock recently
rose 2% Wednesday to $39.11.
The investment from Mr. Loeb's firm sets up a potential battle
with fellow hedge-fund manager William Ackman, who last month
lambasted Herbalife's business model and said he had bet more than
$1 billion against Herbalife, sending the stock plummeting four
days in late December.
The core of Mr. Ackman's argument is that Herbalife distributors
earn more money from recruiting other distributors than by selling
products to the end user. The business, he said, depends on its
ability to pull in new recruits, because existing distributors drop
out at high rates.
Herbalife has called the allegation malicious, saying it is
based on distorted information, and has accused Mr. Ackman of
trying to manipulate its stock, a charge the hedge-fund manager
denies. The company has promised a comprehensive response when it
meets with investors Thursday.
Write to Mia Lamar at mia.lamar@dowjones.com
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