Billionaire Bill Ackman’s play: Politics for profit

Timothy P. Carney – September 9, 2015 – The Washington Examiner

Bill AckmanInvestor Bill Ackman has been very successful at making money, in part because of his ingenuity. One area where he has blazed a path: bet on a company to collapse, then pressure politicians to go after that company.

Ackman’s billion-dollar short of nutrition company Herbalife (which Ackman calls a pyramid scheme) has become notorious as a brash attempt to sic the Feds on a company for the sake of making a short bet pay off. Ackman hired lobbyists, convinced lawmakers to send letters and has leaned on the Feds to investigate Herbalife.

Although he’s a proud capitalist, Ackman paints his plight as altruism: If Herbalife is a pyramid scheme, then it is exploiting the poor, and Ackman wants to end that exploitation.

Today, a story at Fortune recounts the saga and has this very interesting detail:

The truth is — and Herbalife hates to admit this — Ackman’s campaign has already forced a number of positive changes at the company: Herbalife has finally banned lead-generation businesses; it has upgraded its buyback policy to best in class; it has enhanced its disclosures and disclaimers; and it has taken more responsibility for its nutrition club training programs. It is quite possible that the FTC, thanks to Ackman’s pressure, will soon order additional consumer protections.

The problem for Ackman is that improving the company wasn’t the goal. The goal was to destroy it. So for him all these small victories add up to failure: a loss of money and a loss of face.

Big government is a fickle mistress — as Ackman has realized with his efforts to profit off the government backstop of mortgage giant Fannie Mae (Ackman has attacked my brother John’s columns on this matter). Ackman’s attempts to partner with Uncle Sam against Herbalife might leave him a few million poorer.