Can Ackman and Icahn Both Keep Profiting From Herbalife?

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Carl Icahn New Feature 300x270The ongoing battle between hedge fund titans Bill Ackman, Carl Icahn, and Daniel Loeb over Herbalife (NYSE:HLF) has developed into a solid of example of an old adage: for all the posturing and bravado that accompanies high-sake investing, timing is everything in financial markets.

Ackman’s position — he announced in December that his firm, Pershing Square Capital, went short on Herbalife for the tune of $1 billion — stands in direct opposition to that of Loeb and Icahn, both of whom have invested in the company that Ackman has famously called a pyramid scheme. Yet, for now, all three investors are in the black.

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Loeb’s hedge-fund firm, Third Point, has made at least $50 million on its estimated $200-million stake, as a source familiar with the firm’s business told The Wall Street Journal. As Third Point has largely exited its Herbalife stake, Loeb has cashed out much more than the other two investors. For Ackman and Icahn, the gains have only been on paper, but profits have been made nonetheless. Icahn has generated approximately $25 million in unrealized gains on his $590 million investment, while Ackman has raked in more than $200 million in paper profits on his bet of more than $1 billion.

The estimate of Icahn’s profits was obtained by the Journal from a calculation based on the average price at which he purchased the shares, a figure derived from an analysis of regulatory filings. Despite the criticism heaped on Herbalife by Ackman since he took his short position in December and his belief that the company’s business is ultimately unsustainable, its stock price has remained above Icahn Enterprises’ (NASDAQ:IEP) average cost per share…

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