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when billionaires feud on Wall Street

when billionaires feud on Wall Street

high stakes games that the rich and famous play
December 5, 2021
5 min read
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when billionaires feud on Wall Street

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making a bet on the failure of a company or in other words ‘short-selling’ its shares to make a profit is a risky trade. If the thesis plays out it can be very rewarding. otherwise there is no cap on the loss one makes, at least in theory. just ask the hedge funds that got caught out on Gamestop.

or study celebrated Wall Street hedge fund manager Bill Ackman and his bet against nutritional supplements company Herbalife.

in 2012, Ackman placed a $1 billion bet on Herbalife’s stock plummeting to zero as he accused the company of running a pyramid scheme and no viable business. 

but Ackman’s crusade against Herbalife soon faced a roadblock. 

in 2013, Carl Icahn, billionaire and legendary Wall Street investor, started buying Herbalife and over the years even became its largest shareholder with a 26% stake.

Icahn’s move against Ackman didn’t come as a surprise to many as the two had not been on the best of terms since 2003.

Icahn’s involvement with Herbalife even led to a pretty intense on-air argument between the two in 2013 on CNBC’s “Fast Money Halftime Report”.

as Icahn started buying, shares of Herbalife started to rise again. this took a toll on Ackman as he started to accumulate losses on his position every time the stock price went up.

eventually, in 2018 Ackman closed his short position in Herbalife which further sent the stock soaring.

it later came to light that Ackman had suffered an estimated loss of $740 million on his 5-year long bet against Herbalife and by the time he closed his position, Icahn had managed to make an estimated profit of $1 billion on his long position. 

in 2016, a documentary called "Betting on Zero” was made on this entire fiasco. 

by May 2021, Icahn had also sold his entire stake in Herbalife.