Stock Market History: Bill Ackman vs. Herbalife: The Big Herbalife Short

Bill Ackman, the hedge fund manager of Pershing Square Capital, once waged a multi-year, highly publicized battle against Herbalife, a global nutrition company. The battle was not just financial—it was personal, public, and dramatic. Although Ackman ultimately lost nearly $1 billion shorting Herbalife stock, he was eventually proven correct about the company's long-term trajectory. Here’s the story of one of Wall Street’s most infamous showdowns.

Herbalife’s Stock: A Rollercoaster Ride

Today, Herbalife ($HLF) trades at $6.45, but it was once a $60 stock, riding high as a growing player in the multi-level marketing (MLM) industry. Ackman saw something different. In late 2012, he publicly declared Herbalife to be an illegal pyramid scheme, initiating a nearly $1 billion short position in the company. Ackman’s goal was clear: expose the company and drive its stock to zero.

A Campaign Like No Other

Ackman didn’t keep his short position quiet. He launched an aggressive public campaign, including a 334-slide presentation, where he detailed why Herbalife’s MLM model was unsustainable and designed to fail for most distributors. He accused Herbalife of preying on vulnerable communities, particularly targeting low-income and Latino individuals. Wall Street was shaken by the unprecedented scale of Ackman’s attack.

Enter Carl Icahn

Not everyone agreed with Ackman’s thesis. Billionaire investor Carl Icahn, a longtime rival of Ackman, publicly defended Herbalife. In 2013, Icahn called Ackman’s short a “terrible bet” and vowed to prove him wrong. Icahn didn’t stop at words. He began buying shares of Herbalife, eventually acquiring a 16.5% stake by May 2013. His confidence in the company’s legitimacy drove the stock price higher, further pressuring Ackman’s short position.

The rivalry between Ackman and Icahn wasn’t limited to the trading floor. The two engaged in a fiery live debate on CNBC, where Icahn famously called Ackman a “crybaby in the schoolyard.” Icahn argued that Ackman’s public short would create the “mother of all short squeezes,” implying that Ackman’s position would backfire spectacularly. The feud quickly became one of Wall Street’s most infamous rivalries.

Doubling Down: Ackman’s $50 Million Campaign

Despite mounting losses—reportedly $500 million by 2013—Ackman doubled down on his short position. He spent $50 million on a public relations campaign to expose Herbalife as a scam. Pershing Square lobbied regulators, funded protests, and donated to Latino advocacy groups to highlight the alleged harm Herbalife caused to its distributors. These efforts, however, drew intense scrutiny.

Reports emerged that Ackman’s team was pressuring regulators, paying individuals to rally against Herbalife, and donating to organizations that lobbied the Federal Trade Commission (FTC). Critics accused Ackman of attempting to manipulate the market to drive Herbalife’s stock price lower.

The FTC Weighs In

In 2016, the FTC fined Herbalife $200 million and forced the company to restructure its MLM practices. While the FTC did not declare Herbalife a pyramid scheme, the ruling validated some of Ackman’s concerns. For Ackman, however, it was only a partial victory. Herbalife adapted to the new regulations, posted strong earnings, and its stock price remained resilient.

The Endgame

By 2017, Ackman’s short was deeply in the red. He shifted his position to put options, capping his losses but reducing his potential for profit. On February 28, 2018, Ackman exited his position entirely, reportedly losing nearly $1 billion on the trade. Meanwhile, Icahn declared victory and eventually sold most of his Herbalife shares at a profit.

The Aftermath

Herbalife’s stock topped out about a year after Ackman exited his short and has since been on a steady decline, aligning with Ackman’s original thesis about the company’s unsustainable trajectory. Today, the stock trades at $6.45, far from its highs.

Lessons From The Herbalife Saga

The Herbalife battle remains one of Wall Street’s most dramatic episodes. It showcased the risks of shorting stocks, the power of rival investors, and the importance of timing and strategy. Ackman was ultimately correct about Herbalife’s long-term decline, but his aggressive tactics and public campaign cost him dearly. The saga serves as a cautionary tale for investors about the unpredictable nature of financial markets—and the perils of making investing personal.