Bill Ackman "press releases" - legal ?

Guys

Legit question, I see Bill Ackman has a $1B short position in Herbalife. With that said, his company is issuing press releases which clearly could influence the price of the stock.

http://blogs.wsj.com/marketbeat/2013/03/14/ack-attack-is-back-with-another-volley-against-herbalife/

I thought this was an illegal practice or at least unethical, is it not ?

Thanks

 

you're looking for ethics on Wall St?

 

Good point ! But I kinda am surprised that someone holding 1B of stock is "allowed" to issue press releases on the stuff he holds. I would have thought this would fall under "price manipulation" or whatever you would call it.

 

Wall Street analysts do this every single day.

 

+1

And the "power to be" does not consider this manipulation.

 

I think Ackman is probably a little closer to the line than most managers would be comfortable with. I don't think there are any issues of market manipulation, not unless the SEC or someone could prove his claims were fraudulent, ie that he knew them to be untrue.

There is a difference however between what he's doing and a long manager touting his stocks. Ackman is basically suggesting that the company is doing something illegal. He is comparing them to another company that was charged by the FTC with running an illegal pyramid scheme. Accusations of illegal conduct are clearly defamatory. Ackman would argue that he is just presenting his opinion and that his comparisons are factually accurate. Legally, he is probably right, but I doubt many fund managers would want to get out on ice that thin.

 

for that precise reason he published his research in November last year. Of course one part of the rational is to get others behind the trade as well as draw the attention of regulators. But another is to make sure he cannot be accused of market manipulation later on. As long as information is put out into the public domain then anyone can act on it. It would be highly illegal if Ackman took a position the day before he came out with this report. We will do anything (among his legal team) to make sure his case is as tight as possible.

 

...can't hold stocks in the analyzed company...

 

What about the firm or banks that employ them?

 

Why would it be illegal if he took a position the day before his report came out? He's not an insider.

As I recall, he was short when it came out. That was part of Icahn's claim that Ackman took this large position then tried to move the market so his MTM would look good at year end.