You don’t tug on Superman’s cape
You don’t spit into the wind
You don’t pull the mask off that old Lone Ranger
And you don’t mess around with Carl Icahn
We have followed Carl for decades and love him or hate him, he has been making a mint over the last few years. We aren’t sure of the exact billions he has made over the past few years but he has been hotter than a ball of fire over the last 6-12 months and his investment in HerbaLife (HLF, $41.92, up $3.65) is no joke.
A month ago we covered the epic battle between Carl and rival hedge-fund manager Bill Ackman who has a $1 billion short position in the stock. At the time, shares of Herbalife were trading near $44 and proceeded to fall to $30 by early February before settling into a trading range.
Dan Loeb, another hedge fund manager, has an 8.2% stake in Herbalife and Carl is at 13%. The plan from Carl could be to take the company private. This Jersey Shore “situation” between these three dudes is a movie made for Hollywood.
We mentioned shares were north of $47 in after-hours trading last night and this morning they opened north of $44. Shares reached a high of $47 and as we type, Carl is on the tube.
Shares have a shot of pushing $50 if the short-covering picks up ahead of the 3-day weekend. The market will be closed on Monday for Zombie Day so traders who are short Herbalife will have to decide if they want to continue to be short the stock.
A leverage buyout, a tender offer, or a continued squeeze will cost money to hold open the higher shares go and it will depend on the pain threshold they have. Fundamentals don’t matter anymore for this stock and you can toss the chart work out the window given the current volatility.
The February 50 calls (HLF130216C00050000, $0.05, up $0.03) closed at 2 cents yesterday and traded up to 25 cents at the open. We thought the battleground would occur at the $50 level and it still could but the February 45 calls (HLF130216C00045000, $0.40, up $0.37) have been more active as over 15,000 contracts have traded today. Open interest is just under 8,000. The calls options are up a whopping 1,233% and here is the screenshot.
As you can see, these options traded up to $1.15 but there was no way of knowing Carl would deliver this Valentine’s present the night before the February options expire. Talk about Cupid pulling back his bow and letting his arrow go…
This story isn’t over and there is a lot of money in the Herbalife pot. We got spanked by trying to get into the ring with these two titans, so we will likely sit out any future rounds but we will be watching the story.
The market is pulling back ahead of the long 3-day weekend but support is holding up. The bulls are on track to win their 7th-straight week and will need to hold Dow 13,992; S&P 1,517; Nasdaq 3,193; Russell (2000) 913.
Currently, the Dow is down11 points to 13,962 while the S&P 500 is lower by 3 points to 1,519. The Nasdaq is off 2 points to 3,196. We have some last minute updates before we hit the road so please check the Members Area for the updates. We will be back Monday night with the Weekly Wrap and Tuesday morning with the Daily. Until then, have a great 3-day weekend everyone!