Jack Mohr (The Street) -- In ancient Greek mythology, a character possessed Hubris if he convinced himself he could be equal to the gods. In "Oedipus Rex", King Oedipus suffered from Hubris. According to the prophecy of "The Oracle of Delphi", Oedipus was fated to kill his father and marry his mother. The King didn't like this plan. His Hubris blinded him, and thinking he could defy the gods, he embarked on a chain of actions that led inextricably to, well, the killing of his father and marrying of his mother.
Enter Bill Ackman, the 45 year-old Harvard educated billionaire and founder of the prestigious $13B Pershing Square Capital Management. For well over a year now, in a rolling thunder of increasingly bad news, his $1 billion bet against the global nutritional supplement company Herbalife (HLF) has been looking more and more like an act of supreme Hubris. Yesterday, in a three-hour fist-shaking at the gods of finance, Ackman may have finally received his Oedipus reward.
For anyone new to the story, here's a quick recap. Back in December 2012, Mr. Ackman gave a 342-slide presentation at a conference in NYC in which he publicly disclosed his $1 billion 'short' bet against Herbalife, accusing the company of being a criminal pyramid scheme, declaring "This is the highest conviction I've ever had about any investment I've ever made" and claiming its stock was destined to fall to zero once regulators stepped in. Herbalife shares proceeded to plummet, losing nearly half their value in the three days following the presentation. The market's initial response did not last, and Herbalife is up over 100% since then as regulators failed to step in swiftly (though the FTC announced it has opened up an inquiry into the matter) and other hedge fund luminaries, most prominently Carl Icahn, have taken the opposing position. Ackman wrongly assumed that his initial powerpoint presentation would cause a market panic that would render the company's sales force inert and compel regulators to step in immediately. Fifty million dollars, two years and tens of thousands of man-hours later, Mr. Ackman has hardly reaped the fruits of his labor. Instead, he is sitting on security losses well in excess of $500 million.