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Herbalife stock surges after Icahn grabs stake

Published on NewsOK Modified: February 15, 2013 at 1:55 pm •  Published: February 15, 2013

NEW YORK (AP) — Strictly business, nothing personal. That's how Carl Icahn characterizes the latest turn in his clash with fellow Wall Street titan William Ackman.

Both men have a keen interest in Herbalife, a maker of dietary supplements designed to promote weight loss. Ackman claims the company is a fraud and has bet that its stock price will crumble; Icahn says it's a great buy.

They can't both be right, and for now it's not clear which one is. Icahn, for his part, disclosed in a regulatory filing late Thursday that he had accumulated a 13 percent stake in the company, essentially betting that Ackman is dead wrong. Icahn says he's not making his bet merely to spite Ackman.

"I'm doing this to make money, that's what I do," Icahn said in a telephone interview with CNBC Friday. "The fact that I don't like Ackman is, you could say, the strawberry on the ice cream."

Icahn was speaking on the same CNBC show on which he and Ackman had a shouting match three weeks ago over Herbalife and other topics that became the talk of Wall Street.

Herbalife's stock jumped $1.97 to $40.24 following the disclosure of Icahn's stake as investors bet that the financier might be right in his positive assessment of the company.

A surge in Herbalife stock would be disastrous for investors who have taken a "short" position in the company. Selling a stock short is a tactic in which an investor borrows shares in a company from a broker and then immediately sells them on the open market. The investor anticipates that the stock price will fall, allowing him or her to buy back the stock at a lower price in the future. The investor then returns the borrowed shares to the broker, pocketing the difference.

If stock rises instead, however, the investor will be forced to buy it back at a higher price than what he or she sold it for, resulting in a loss.

Icahn said he sees "great value" in Herbalife and that Ackman had created an opportunity for him by pushing down the stock price. Herbalife slumped as low as $26.06 in December after Ackman said he was shorting the stock.

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