Least Favored in 2013: Featuring the year's shockers from Wall Street to Washington. Read Fed Policy shenanigans; Tech spies; SeaWorld tragedy; Caterpillar-China scandal; Bud Beer scandal; Bill Ackman's Herbalife; LIBOR rigging; Forex Scandal; and check out this video CEO Walk of Shame.
NEW YORK (TheStreet) -- There is nothing a little guy likes quite so much as watching a big, arrogant guy take a tumble.
We learned in 2013 that some big arrogant guys feel the same way. When Bill Ackman of Pershing Square fell hard on J.C. Penney (JCP) - Get Report, there were several who figured he should fall harder on Herbalife (HLF) - Get Report.
For those who don't remember, Ackman once thought he could save J.C. Penney from a slow death and wound up nearly giving it a quick one. After taking a big position in the stock, he brought in Ron Johnson from Apple (AAPL) - Get Report, whose cure was so radical the customers fled in droves.
At this writing, the company's fate remains up in the air. But the fate of Ackman's investment in the stock is clear. He was a loser. So are many J.C. Penney employees and former employees. Investment bankers often forget they're playing with peoples' real lives when they hatch their schemes.
While Penney's was still crashing to Earth, Ackman became convinced Herbalife, a multi-level seller of health products, was really just a pyramid scheme. Late last year he posted his findings online and began selling the stock short.
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This is where the fun starts for the little guys who resented Ackman's behavior toward Penney's.
Rather than join him in pounding Herbalife stock or just ignoring him and letting the short play out, rivals -- including Dan Loeb of Third Point, Georges Soros and Carl Icahn -- bought with both hands to support the stock, causing it to rise.
At this point the merits of Ackman's argument went out the window. What mattered was whether he won or lost, and the other titans were determined that he'd lose. We little guys knew that no matter what happened, some big guy was going to fall -- so we ran for the popcorn.
What is most curious about this story, scandalous or not, is that as Christmas comes around again this is a present that remains unopened, a story that has yet to end.
Ackman has cut back his bet, estimated to be worth $1 billion, and Herbalife stock has kept rising. Ackman admitted in November he'd lost $400 million to $500 million on Herbalife, but big wins on Canadian Pacific (CP) - Get Report and Air Products (APD) - Get Report meant he could hang on.
Herbalife, meanwhile, has gone from strength to strength. As of this writing the stock was trading at over $75/share -- Ackman put his short on at around $40. After a KPMG auditor leaked data on the company, Herbalife fired the company, got a new audit from PriceWaterhouseCoopers and said that audit found nothing wrong.
Icahn, who has emerged as a sort of spokesman for the longs, and a hero to the little guys, got on TV to crow after the re-audit and said the stock was still undervalued.
As our Herb Greenberg wrote this week, Ackman is right in that the new audit didn't even ask the questions about Herbalife's marketing on which he based his short.
But, as I said before, the merits don't matter any more. What matters is whether Ackman will be forced to give up, losing money and prestige in the process.
Ackman has, in fact, released a second presentation calling Herbalife Robin Hood in Reverse, focusing on recent Securities and Exchange Commission actions.
One of his slides, from an Oct.17 SEC alert, tells investors, "If a program primarily focuses on recruiting others to join the program for a fee, it is likely a pyramid scheme." The alert also warned about "get rich quick" pitches and showed Herbalife salesmen making just such pitches to new recruits.
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I should note here that I worked for a multi-level marketing company while in college. I barely made enough to get back my investment. But I still have the knives, and they still work well.
So as of this writing we still don't know how this story will end. Is Herbalife scandalous, or are Ackman's actions toward it scandalous? Will Ackman keep losing money, and will Carl Icahn keep making money in his heroic defense of the little guy's right to schadenfreude?
Cliffhangers like this are the best Christmas present a financial writer could ask for. My best advice for 2014 is to buy popcorn futures.
At the time of publication the author owned shares of AAPL.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.