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Hedge fund manager Bill Ackman, who runs Pershing Square, gave another presentation on Herbalife.

This time it was on Herbalife's business practices in China. 

Pershing Square says they have done an investigation and that they have evidence that the company is operating in violation of Chinese law.

"The report will show that Herbalife’s business in China operates much like the company’s business in the rest of the world – as a pyramid scheme," Pershing said in a press release. 

NYTimes' Front Page Article

The first thing he did was address yesterday's New York Times front page article.  The article was about Ackman lobbying folks to help him bring about an investigation into Herbalife that would bring down the company.  

Beginning in the summer of 2013, Ackman said that he and his legal counsel went to Washington D.C. to meet with lawmakers.  He said they did it to raise the profile of Herbalife and the increase the chances that the FTC and other agencies would investigate the company.

Ackman pointed out that he has the right to petition the government and to free speech. He said the law requires him to hire lobby firms if he spends more than a certain amount of hours lobbying congress. 

Three members of congress wrote letters in 2013.

In October 2013, Ackman said that he and his senior counsel David Klafter met with Senator Markey (D-MA)'s staff.  His political conferences suggested they meet with the senator because he's "concerned with consumer protection", Ackman said. 

He said that they told Markey's staff that they were short the stock and he would give any profits he made personally to charity during an hour-long meeting. 

In January, Markey put out three letters to Herbalife CEO Michael Johnson and the chairs of the SEC and the FTC.

The stock dropped about 14% after the letters were released.

"I believe the stock price dropped because it was clear from Markey letter compared with other letters that his staff understood the important questions that needed to answered in order to determine whether or not Herbalife is violating the law," Ackman said.

Ackman says he's never given any money to Markey. He says he's been a larger supporter of the Democratic Senatorial Campaign Committee, though.   

What's more is Ackman says he just learned that his sister had donated $500 to Markey. He said he had no prior knowledge before the NYTimes article. 

China Business Practices

David Klafter, Pershing's legal counsel, went over Herbalife's presence in China since 2001.

He noted that China has strict laws for direct-selling. Klafter alleges that Herbalife's violates China's direct selling and pyramid sales laws.

Here's what he thinks their investigation finds: 

For their investigation, Pershing Square retained OTG research. Aaron Smith-Levin, a researcher from OTG Research Group, said their staff in China met with over a dozen distributors there to gather their findings. 

He concluded, "Based upon Herbalife's own internal documents, Herbalife does not calculate China Sales Employees (a/k/a China royalties) based upon "Hourly Consulting Fees." Instead, Herbalife calculates royalty compensation in China as percentages of Retail sales... just as Herbalife calculates royalty overrides in the rest of the world." 

Questions for Ackman

Ackman took questions via email. He had a total of 74 questions.

Someone asked him if there's anything that would cause him to change his thesis on his Herbalife bet. 

Ackman says he has not learned one new fact that's inconsistent with his original thesis that the company is a pyramid scheme.

"There's no circumstance under which we are wrong on whether or not Herbalife is a pyramid scheme. There's investment risk with respect to Herbalife. There's no certainty the government will investigate the company...I believe if the FTC, or the SEC or state attorneys general investigated Herbalife and looked into the issues we've identified there's a certainty the company would be found in violation of U.S. law, Chinese law, other law and the government would work to shut the company down. What the government does we have no control over. That is the investment risk in this situation." 

Another person asked him what makes him think the FTC will shut down Herbalife knowing that a hedge fund manager will make a lot of money. 

Ackman believes that they will have to investigate.  He said that yesterday's page 1 NYTimes story was not his favorite, but he it was "helpful." He thinks regulators will have no choice but to probe the company. 

Another listener asked him about doing another activist short. Ackman said he doesn't know if he'll do another activist short. Ackman said that folks attack your "reputation and your integrity." He added that the New York Times also writes "nasty articles" about him.  This also happened to him during his MBIA short. He was criticized in the financial media, but ultimately ended up being right. 

Taking Herbalife 'To The End Of The Earth'

In late 2012, at a special Sohn Conference event, Ackman publicly declared that Pershing Square was shorting $1 billion worth of Herbalife stock. In a 342-slide presentation, Ackman laid out his thesis that the company operates as a "pyramid scheme" that targets lower income individuals, particularly from the Hispanic population. 

It's his belief that regulators, specifically the Federal Trade Commission, will be persuaded to investigate and shut the company down.  

Herbalife has denied Ackman's allegations. 

What's more is a number of hedge fund managers, most notably Ackman's rival Carl Icahn, have snapped up significant long positions in the stock.  

The Herbalife short has been Ackman's "biggest loser" in his hedge fund's history. Since Ackman revealed his short position, shares of Herbalife have surged. So far, he's suffered an estimated $500 million in paper losses. 

He's continued to say that he will take this short "to the end of the earth." 

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Hedge fund manager Bill Ackman gave another presentation on Herbalife—a multi-level marketing company that he's betting $1 billion will go under. 

Ackman, who runs Pershing Square Capital, declared over a year ago that he's shorting Herbalife because he believes the company operates as a "pyramid scheme." 

Herbalife has publicly denied Ackman's allegations. 

So far, the short hasn't played out in his favor either. He's lost an estimated $500 million in mark-to-market losses. 

His latest presentation focuses on Herbalife's business practices in China. In short, Ackman believes that the nutrition company is violating Chinese direct-selling laws. 

Specifically, Pershing Square alleges that Herbalife violates Chinese laws by doing the following: 

• "Paying multi-level, royalties based upon unlimited downline levels"
• "Paying royalties and commissions totaling more than 30% of sales volume."
• "Incentivizing Distributors to recruit a potentially infinite downline in order for Distributors to reap sales-based 'Consulting Fees'" 
• "Permitting and incentivizing individual Distributors to recruit other participants." 

We've included his slidedeck. This time it was only 56 slides compared with his famous 342-slide presentation when he first unveiled his short thesis. 

One of the greatest feuds in Wall Street history appears to have come to an end.

Billionaire activist investors and long-time rivals Carl Icahn and Bill Ackman have made up after a decade of fighting.

The Wall Street Journal reports:

The hatchet was buried on Thursday. Mr. Ackman spoke with Mr. Icahn's assistant on April 24 saying, "I am calling to forgive Carl," according to Mr. Ackman. Mr. Icahn, 78 years old, returned the call and told Mr. Ackman, 47, that "it is a blessing to forgive," Mr. Icahn said, "and I forgive you."

The development suggests that the duo, who famously clashed on their views about nutrition company Herbalife, could team up on activist investments, where investors push for broad changes at companies or try to move prices with their arguments. Neither would name a target or timetable.

In the future, Mr. Ackman said: "There is a much greater possibility that we are on the same side than the opposite."

The pair of activist investors have been fighting for years.

It all began with a "forgettable" deal in 2003. Back then, Ackman was running Gotham Partners, which was being hit with redemptions and investigated by the SEC at the time over MBIA (the Municipal Bond Insurance Association).

He cold-called Icahn and asked him to buy his shares of Hallwood Realty, a real estate company trading for about $60 a share. Ackman believed the stock was worth $140. Icahn agreed to buy the shares for $80, with a deal that he would split the profit with Ackman if he sold the shares within three years.

In 2004, Hallwood merged with another company for $137 a share, but Icahn wouldn't give Ackman a cut. A lawsuit followed, Ackman won and Icahn paid him the $9 million Ackman's investors were owed.

Things got so nasty between the two fund managers that waiters at upscale Italian restaurant Marea know never to seat them near each other. 

Then, in December 2012, Ackman publicly declared that he was shorting $1 billion worth of Herbalife because he thinks the company is a "pyramid scheme." Shortly after that, Icahn decided to bet against Ackman and amassed a large long position. He called it a "no brainer." 

A month later, the two fund managers were involved in a nasty public fight, live on CNBC. While Ackman was responding to Icahn's criticism of his Herbalife investment, Icahn called in to the "Half Time Report" and the insults were flying.

"I'm telling you he's like a crybaby in the schoolyard. I went to a tough school in Queens you know, and they used to beat up the little Jewish boys.  He was like one of the little Jewish boys crying that the world is taking advantage of him ..." Icahn said when Ackman called him up in 2003, adding "You'll rue the day I ever met the guy."

"He's the quintessential example of if you want a friend on Wall Street, get a dog," Icahn later said.

While Ackman made the first call to forgive Icahn, it was actually Icahn who made the first step by defending Ackman on CNBC after slamming him for the last year. 

He defended criticism of Ackman's Valeant and Allergan play. Some folks have raised concerns about Ackman buying a 9.7% stake in Allergan's stock, knowing that Valeant would make a bid for the Botox-maker. 

"I don't even think it's immoral. I mean, he's doing something for the company. I mean — I, frankly, never thought I'd be defending him. But I think he's — I don't think there's anything wrong with that,"Icahn told CNBC's David Faber.

While they still disagree on Herbalife, all the fighting in the past seems to be water under the bridge for now. 

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Shane Dinneen, the young Pershing Square analyst who worked on the Herbalife short, has broken his silence since resigning from the hedge fund several months ago. 

Dinneen wrote a blog post on Herbalife's first quarter earnings report for SeekingAlpha yesterday.

He's also been writing incredibly long comments on Herbalife-related articles. So it looks like we could be hearing more from him. 

Here's his summary from his first SeekingAlpha post:

• Herbalife's headline numbers in Q1 appear good at first blush, but below the surface, cracks are beginning to appear in the foundation.
• Herbalife's write-down in Venezuela in Q1 should have been bigger. Had the company used the SICAD II rate to re-mark its books, GAAP EPS would have been ~ZERO.
• Adjusting for the effect of exchange rate changes on cash, cash flow from operations DECLINED 25% vs. Q1'13.
• Dividend cancellation could indicate Herbalife is concerned about having sufficient distributable reserves at its parent company and US subs to meet its previously reported dividend, repurchase and capex guidance.
• Various red flags in Q1 suggest the business could be headed for a slowdown (not a good thing for a momentum-driven business).

Dinneen played a major role in putting together Pershing Square's Herbalife short position.

In December 2012, Pershing Square publicly delcared that it's short $1 billion worth of Herbalife stock.

Pershing's founder Bill Ackman said he believes the company operates as a "pyramid scheme." He's betting that the stock will go to $0 because regulators, specifically the Federal Trade Commission, will investigate the company and shut it down. 

Dinneen got to help Ackman give a massive 342-slide presentation at that special Sohn event. That's something that most young analysts will never get to do in their career.

In the months that followed, though, the stock rose higher and Pershing Square had amassed hundreds of millions in paper losses. 

In the beginning of this year, Ackman sent a letter confirming that Dinneen had resigned from the fund a while ago. Prior to that, the Twittersphere had been speculating that Dinneen was no longer in Pershing's offices.

In his investor letter, Ackman called Dinneen "one of the most talented investment analysts" he had ever worked with and someone he holds in "high regard." He also said that Dinneen is welcome back at Pershing Square at any time.

Just last month, Herbalife confirmed that it's being investigated by the FTC. 

Pershing Square still hasn't broken even on its Herbalife short.

Read Dinneen's full article on SeekingAlpha »

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DealBook's Ben Protess and Alexandra Stevenson have a big article on how federal authorities are looking into a number of hedge funds on both sides of the Herbalife trade.

Authorities are looking into well-timed bets in Herbalife stock.

No one has been accused of any wrongdoing. 

DealBook's report also includes a little tidbit about how a junior-level Pershing Square Capital Management employee told his roommate about the fund's Herbalife short position before it was publicly announced.

DealBook points out that this isn't necessarily illegal. However, the roommate is said to have shorted Herbalife and made about $20,000, the report said.

From DealBook: 

Before the announcement, the people briefed on the matter said, one of Mr. Ackman’s junior employees mentioned the planned trade to his roommate.

The conversation was not necessarily illegal. The junior employee, who like Pershing Square has not been accused of any wrongdoing, may have shared information with his roommate in strict confidence.

But the roommate may have crossed a legal line when he helped a friend place a bet against Herbalife. After Mr. Ackman’s presentation pummeled the company’s stock, the people said, the friend reaped at least $20,000.

The junior employee has left Pershing Square. He left the fund for reasons unrelated to the investigation, the report said. The junior-level employee also hasn't been accused of any wrongdoing. 

Also, the report points out that the roommate could be liable if he broke an explicit promise to keep it confidential. 

(Side note: Both of the analysts who worked on Pershing Square's Herbalife short left the fund last year.)

The hedge fund battle over Herbalife, a multi-level marketing company that sells weight-loss products, has been going on for over a year now.

Bill Ackman, who runs Pershing Square, is shorting $1 billion worth of Herbalife, with a price target of $0. He believes the company operates as a "pyramid scheme" that targets lower-income individuals. As a result, he believes regulators, specifically the Federal Trade Commission, will shut it down. 

Ackman's long-time rival, billionaire investor Carl Icahn, owns a massive long position in the company. He bought the stock shortly after Ackman publicly revealed his short position. He owns 16.8% of Herbalife's shares. He has also said that he believes Ackman will be the victim of a "the mother of all short squeezes." 

In the months that followed Ackman's massive 342-slide presentation, Herbalife's shares surged to all-time highs. Pershing Square had racked up hundreds of millions in paper-losses.

Back in March, though, Herbalife confirmed that it's under investigation by the FTC.

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While most hedge funds are struggling in 2014, Bill Ackman's Pershing Square is having a spectacular year.

According to the Wall Street Journal, Ackman's $13.7 billion Pershing Square Capital is up 18.7% for the year through the end of April.

To put that in perspective, the S&P 500 is up about 1.6% year to date. According to HFR's HFRX Equity Hedge Index, the average equity hedge fund is down -0.31% year to date.

Ackman is known for being a mostly long-only fund manager. The activist investor takes large positions in a handful of companies. 

His portfolio includes Air Products & Chemicals, Beam, Burger King, Canadian Pacific, Howard Hughes, General Growth, and Procter & Gamble, his latest 13F filing shows.

Ackman recently disclosed massive stakes in pharmaceutical companies Valeant and Allergan. He's partnered with Valeant to pursue a takeover of Allergan. This investment helped his fund rise 7.3% in April, the WSJ noted.

Ackman is also notoriously short Herbalife, a multilevel marketing company that sells weight-loss shakes. He rarely shorts companies. Ackman believes Herbalife operates as a "pyramid scheme" and that regulators will shut it down.

The FTC and a number of attorneys general are investigating the company.

He has yet to break even on that short bet.

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Every year Bill Ackman's hedge fund, Pershing Square, sponsors an investment idea contest. The winners get $100,000 and all the street cred that comes with impressing one of the world's top investors.

This year three students at Columbia Business School, Oystein Kvaerner '15, Matt Ford '15, and Brian Waterhouse '15, claimed the prize for their long thesis on security firm, Allegion. The stock is currently at $49.92, and but they've set a price target of $77.

The guys had collectively done four or five ideas previously, and really started digging into this in mid-March. That meant reading every transcript and contacting everyone in the industry they could find.

They plan to donate a portion of their winnings to Columbia Business School. The rest will be used to pay tuition, get married — you know, the usual stuff.

Billionaire hedge fund manager Bill Ackman just wrapped up his latest Herbalife presentation.

Ackman, who runs Pershing Square Capital, gave what he called "the most important presentation" of his career.

In shorting Herbalife to zero, he's gone as far as comparing the company to the Nazis.

But today the market laughed at him: The stock surged 15% as he spoke.

There were hundreds of folks gathered at the AXA Equitable Building in Midtown Manhattan. Even Ackman's father was in attendance. Thousands of people tuned in via a webcast. 

For more than a year, Ackman has been loudly shorting Herbalife — a maker of nutrition shakes. He believes the company is a "pyramid scheme." His presentation today focused on the company's so-called nutrition clubs.  

Earlier this morning, Herbalife 's CFO, John DeSimone, told CNBC that Ackman's "bark is worse than his bite."

If the stock surge means anything, perhaps DeSimone was correct.

There wasn't a major bombshell in Ackman's presentation. The 250-plus slide deck was very detailed. The biggest thing was that Ackman believes the company is skirting labor laws with its nutrition clubs.

In sum, though, Ackman alleged that Herbalife had "fictitious customers" and a "fictitious business opportunity." He called Herbalife "a fraud perpetrated by Herbalife's senior management and members of its Founder's Circles, Chairman's Club and President's Team conceived, designed and executed to exploit the poor."

Ackman began the presentation by going over the backstory about Herbalife's founding. He then moved to his Herbalife "pyramid scheme" thesis. 

Ackman claimed Herbalife "targets the poorest of the poor." He then shared some slides based on a document he obtained from a whistleblower. 

Ackman claimed that Herbalife "seeks to exploit the extremely poor in new and existing markets."

He said that Herbalife denies it targets ethnic groups.

Ackman claims one way they do this is through the nutrition clubs. 

According to Ackman, Herbalife's nutrition clubs are critical to the company's growth. 

Ackman said that Pershing Square spent $50 million on investigating:

"I'm not proud of that number."

He said they investigated over 240 nutrition clubs:

"We had investigators go in and become part of that program."

First, he went over the rules of the nutrition clubs. For example, the clubs aren't allowed to attract customers – no advertisements or promotions allowed. They also can't have signage or an open-closed sign. 

Ackman said that his team went over the economics of 10 nutrition clubs in Queens, New York. He concluded that they're a money-losing business. On average, he said, these clubs lose $12,000 a year before paying the owner. 

"This doesn't seem to be a particularly good business model," he said. 

Ackman said the real purpose of the nutrition club was to recruit members. 

He said these clubs "grow like a virus" through duplication. He showed a slide comparing the number of McDonalds' and Herbalife nutrition clubs in Queens. He pointed out that while the McDonalds' are spread out, the nutrition clubs are on top of each other.

Ackman then invited Christine Richard, a former Bloomberg News reporter turned researcher who gave him the Herbalife idea, on stage. His firm's lawyer, David Klafter, also joined him on stage. 

They started going over how you get certified to run a nutrition club. 

In short, Ackman believes the nutrition clubs are a big fraud.

"If you look at the greatest frauds," Ackman said using Enron's phantom trading floor as an example, "what Herbalife has is they have phantom or fictitious customers."

He said the people running the clubs aren't bad people. 

"It's a tragedy because they don't know they're being defrauded." 

Ackman also alleged that the clubs are violating labor laws.

"Everyone's working without being paid, which is a violation of the labor laws." 

It got emotional at the end when Ackman talked about the "American dream" his father and grandfather were fortunate to obtain when they came to the U.S. 

"I'm a huge beneficiary of this country. Michael Johnson is a predator ... It's criminal. It's time to shut [Herbalife] down," Ackman said choking up. 

"The American dream has been tarnished in a lot of different ways...but when you have a New York Stock Exchange company specifically targeting people and using the American Dream principles ... they sell the American dream. It's criminal. Unfortunately, it's taking the regulators too long." 

The Ackman-Herbalife saga has been ongoing for more than a year and a half.

In late December 2012, Ackman publicly declared via a 342-slide presentation that he was shorting Herbalife – a multilevel marketing company that sells nutritional supplements and weight loss shakes.

Ackman believes the company operates as a "pyramid scheme" that targets lower income individuals. It's Ackman's contention that regulators, specifically the Federal Trade Commission, will be persuaded to shut the company down.

Shortly after, a number of fund managers, most notably Carl Icahn, piled on by going long on the stock shortly after Ackman revealed his short bet.

Icahn, who seems to have made up with Ackman more than a year after a nasty televised brawl, said last week at a conference that he hasn't sold a single share of Herbalife.

Back in March, the FTC opened an investigation into the company.

So far, Ackman has racked up millions in paper losses on his bet. He has yet to break even on his short. He's said that he will take this short to "the end of the earth." 

One person in the crowd asked if Ackman was trying to goad the company into suing him, given his inflammatory language.

Ackman responded: "Bring it on."

SEE ALSO: Ackman's Herbalife presentation

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It's been a rough couple of weeks for Bill Ackman, and this news isn't going to make it any better.

Ackman's hedge fund, Pershing Square, and pharmaceutical company Valeant are being sued for alleged insider trading by Allergan, their joint hostile takeover target.

"This case is about the improper and illicit insider-trading scheme hatched in secret by a billionaire hedge fund investor on the one hand, and a public-company serial acquiror on the other hand," says the complaint. "... The method the Defendants chose was to operate in secret, flouting key provisions of the federal securities laws designed to protect investors from precisely this type of predatory conduct."

Ackman bought just shy of 10% of Allergan this spring in an attempt to gain more pull in his and Valeant's attempt to sway shareholders to vote for a buyout. It was a move that hearkened back to Wall Street's 1980s corporate raider days when moves like that were called a "toehold."

In this case, Allergan is specifically alleging that Valeant and Pershing have failed to disclose material information to push the takeover through, and circumvented insider trading laws — specifically SEC rule 14 e-3, which has to do with making tender offers for companies based on or while knowing material non-public information.

In February, the complaint alleges, Pershing Square, with a minuscule contribution promised from Valeant, created a shell company called PS1 LLC. It started buying Allergan shares after Valeant started showing signs that it would make a tender offer for Allergan, according to the lawsuit.

Meanwhile, Pershing and Valeant allegedly signed an agreement that they would not make a tender offer for Allergan.

According to the filing, "PS Fund 1’s LLC agreement was not amended to add Valeant as a member until April 6, 2014, and Valeant’s capital contribution – a minuscule 3 percent of the total funds – was not made until April 10, 2014, just one day before PS Fund 1’s ownership of Allergan stock crossed the 5% threshold on April 11, 2014."

PS Fund 1's stake in Allergan reached 9.7% on April 21. On April 22, Pershing and Valeant announced that they would attempt a "friendly merger" Valeant between and Allergan.

Of course, we know this hasn't been friendly. Allergan has been telling anyone who will listen that Valeant is a company with almost no organic growth that needs to make acquisitions to survive. Once Valeant owns a company, according to Allergan, it slashes its research and development and gobbles up its products, raising their prices until their patents wear out.

Allergan isn't the only one saying this either. Famed short-seller Jim Chanos of Kynikos Associates, also believes Valeant is an "accounting rollup" and is shorting the stock.

Valeant and Pershing, for their part, released a statement calling the lawsuit "frivolous," saying that it was an attempt to "true purpose in bringing the litigation is an attempt to interfere with shareholders’ efforts to call a special meeting."

The shareholder the release refers to is Pershing.

“This is a shameless attempt by Allergan to delay the shareholders’ fundamental right to call a special meeting and vote their shares," Ackman wrote in the statement. "Allergan is threatened by our progress toward calling the special meeting. This scorched-earth approach is further evidence of the board’s and management’s entrenchment.”

Ackman continued, “Allergan’s determination to waste money on a baseless lawsuit against its largest shareholder demonstrates why this board of directors should be removed.”

Valeant CEO Michael Pearson said he was disappointed that Allergan would delay an attempt to generate shareholder value.

Both Valeant's and Allergan's stocks are down slightly on the news of this lawsuit.

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Andrew Ross Sorkin over at Dealbook is out with his take on hedge fund manager Bill Ackman and pharmaceutical company Valeant's hostile tag-team attempt to takeover Allergan.

"...something hasn't smelled right about these clever machinations," Sorkin writes. "An analyst at Sanford C. Bernstein quite rightly titled a report 'How Can It Be Legal?'"

It's a question very much up for debate since last week, when Allergan submitted to a U.S. Court that the takeover attempt is, in fact, illegal.

In a lawsuit, the pharma company alleged that Ackman — whose hedge fund Pershing Square owns just under 10% of Allergan — and Valeant were in violation of SEC Rule 14 e-3, which prohibits entities on the verge of making a tender offer — an offer bypassing the board and going directly to shareholders — for a company from disclosing that information.

Ackman and Valeant have called the case "frivolous" and "shameless attempt" to delay the takeover.

In February, Allergan's complaint alleges, Pershing Square, with a minuscule contribution promised from Valeant, created a shell company called PS1 LLC. The fund then started buying Allergan shares after Valeant started showing signs that it would make a tender offer for Allergan, according to the lawsuit.

Meanwhile, Pershing and Valeant allegedly signed an agreement that they would not make a tender offer for Allergan. Allergan submits that that agreement was an attempt to cover their tracks.

And Sorkin agrees, pointing out that Pearson said on a conference call:

“On April 22, we announced our offer for Allergan. We suspected at the time it would ultimately have to go directly to Allergan shareholders. We were correct.”

The day before, on April 21st, according to the lawsuit, Ackman's hedge fund Perhsing Square, amassed a 9.7% stake in Allergan.

"The stratagem emphasizes the crying need for the SEC to bring its early-warning rules into the 21st century," wrote a team of lawyers from Wachtel, Lipton, Rosen and Katz shortly after the deal was announced. That team included famed anti-activist investing (no fan of Bill Ackman) attorney, Martin Lipton.

But they ultimately determined it wasn't illegal — just questionable.

This is what a lot of lawyers were saying after the deal was announced. It's why Sorkin called the deal "too clever by half."

It's why, when it came time for Ackman's and Valeant's PR people to respond to Allergan's lawsuit, these 'it's not legal but it is questionable' memos were attached to their statement.

But as Sorkin points out, and Lipton and his team wrote — "The structure is crafty, and good for Valeant and Pershing Square (as long as no bad facts emerge, such as undisclosed arrangements, that could get them in trouble)."

Quite a caveat.

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Bill Ackman is taking a piece of his hedge fund, Pershing Square, public, Bloomberg reports.

In a letter to investors, published at Valuewalk, the billionaire wrote that he sees one of his fund's going public later this year, boosting the amount of permanent capital it holds.

It will likely IPO on the London Stock Exchange.

Pershing Square is up 32.1% year to date and 16.1% in the 2nd quarter, net of fees.

Ackman wrote that over the last 10 years his fund is up 626.7%.

It's a nice stat to point to before you take your company public — a la Carl Icahn.

Because we are an active, control and influence-oriented investor, we have avoided being fully invested because of the risk of investor redemptions. For example, during 2009, despite a relatively strong 2008 and a 41% net return in 2009, we had to keep a substantial portion of our assets in cash because of the large amount of investor redemptions we received. We will hopefully begin to address this issue with the initial public offering of Pershing Square Holdings, Ltd. (PSH), targeted for later this year, which will increase the amount of our capital that is permanent.

This capital raise will help Ackman continue his Icahn-like strategy too —  a breed of large cap, shareholder activism, the virtues of which he extols in the letter.

Activism has a “public good” problem for the activist in that all of the other shareholders who typically comprise 90% or more of a target can be considered free riders with none of the costs or the illiquidity, and with all of the upside. The only investors who don’t materially benefit from the activist’s involvement are those that sell out into the activist’s accumulation of its toehold investment in the target, a stake which is typically less than 10% of shares outstanding. And even those sellers benefit, since they are able to sell at a price that has likely increased as a result of the activist’s purchases. The “public good” problem is a reasonable cost for the activist to bear because it is typically the largest shareholder of the corporation.

Ackman also rails against those who would change SEC regulation to force activist shareholders to disclose their positions earlier than they have to now.

The letter also addresses Ackman's infamous Herbalife short, saying that he may extend the position by paying more premiums.

Read the full letter below:

Pershing Square Investor Letter Q2, 2014 by Linette Lopez

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(Reuters) - Pershing Square Capital Management LP, the hedge fund firm run by William Ackman, on Thursday sued the U.S. government, claiming that its stripping of profits from Fannie Mae  and Freddie Mac unconstitutionally short changes investors in the companies' common stock.

In a complaint filed with the U.S. Court of Federal Claims in Washington, D.C., Pershing said the practice since 2012 of sweeping profits from government-controlled Fannie and Freddie into the U.S. Treasury as dividends creates a "windfall" for the government at the expense of shareholders.

It said the practice violates the Fifth Amendment of the U.S. Constitution by taking private property for public use without just compensation. The lawsuit seeks damages and other remedies.

The Treasury Department and the Federal Housing Finance Agency, which oversees Fannie and Freddie, were not immediately available for comment.

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Billionaire investor William Ackman, who often says he is flattered when others follow him into a stock he likes, was joined by several prominent hedge funds that made new bets on takeover target Allergan Inc. during the second quarter.

Regulatory filings released on Thursday give the first comprehensive look at Allergan's redrawn shareholder map since Ackman and deal partner Valeant Pharmaceuticals Inc. made public their pursuit of the Botox maker in late April. And while the data, released in so-called 13-F filings, is backward looking and could have changed in the 45 days since the end of the quarter, investors say that it gives at least a strong flavor for what savvy investors are thinking.

Ackman's Pershing Square Capital Management disclosed a 9.7 percent stake in Allergan at the time. By the end of June, John Paulson's Paulson & Co., Jamie Dinan's York Capital Management, and Andreas Halvorsen's Viking Global Investors had also bought in, according to the documents released by the U.S. Securities and Exchange Commission.

The filings show that several large mutual fund firms that already owned Allergan made even bigger bets during the quarter. T. Rowe Price, for example, more than doubled its position, although it did not say exactly which funds owned the shares.

Paulson's moves have been tracked closely by investors since his winning bet against the overheated U.S. housing market. He has publicly supported Valeant's bid for Allergan, now worth about $49 billion. But many other shareholders have been silent and it was not clear who else had gotten in or gotten out.

In recent weeks, the fight for Allergan has become even more bitter. Proxy advisory firms are urging its shareholders to support Ackman's call for a special meeting to consider a deal.

Yet one of Valeant's top shareholders, hedge fund ValueAct Capital Management, suggested that Valeant may not be able to afford a drawn-out, damaging fight.

Allergan charged in a lawsuit filed earlier this month in California that Pershing Square broke insider-trading laws when setting up its partnership with Valeant. Now U.S. securities regulators are asking questions about the planned takeover, a person familiar with the matter said Thursday.

Thursday's filings show that York Capital Management bought 2.4 million shares of Allergan during the quarter. York also bought put options on Allergan. Eric Mindich's Eton Park Capital Management said it owned 901,000 shares while Viking Global Investors reported owning 803,369 shares. Viking also raised its bet on Valeant by buying an additional 2.5 million shares.

Other new owners include Farallon Capital Management, founded by Tom Steyer and now run by Andrew Spokes, which said it owned 612,500 shares. Hoplite Capital Management also opened a new position and owned 625,850 shares.

Sachem Head Capital, run by Scott Ferguson, who left Ackman's firm in 2012 to open his own shop, also bought in, opening a new position with 490,000 shares. Ferguson also opened a new position in Valeant with 419,500 shares.

Investors who exited or cut their positions include Capital Research Global Investors, which ranked as Allergan's second-largest shareholder at the end of the first quarter but sold out its holdings during the second quarter. Hedge fund Jennison Associates cuts its position by more than half, selling 6.2 million shares while Montag & Caldwell sold 1.3 million shares, cutting its stake by 36 percent.

The decision to buy in at that time paid off big as Allergan's stock price surged 38 percent in the second quarter.

Since then the share price has come under some pressure. The spread on the deal — or the difference between the value of the two companies' shares and the ratio implied by the deal's terms — has widened slightly to about 5.2 percent from less than 3 percent earlier this week after a key Valeant shareholder questioned the deal's logic.

Some investors have said that Allergan's share price suggests the deal may have less of a chance of getting done now. But several investors told Reuters this week they expect that Ackman will succeed in attracting enough support to call the special shareholder meeting where shareholders will get their first chance to say what they think about the deal.

(Additional reporting by Caroline Humer, Olivia Oran and Soyoung Kim in New York; Editing by Michele Gershberg and Lisa Shumaker)

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Hedge fund manager Bill Ackman sent the following letter to Allergan's board telling them they have put up the most "shareholder-unfriendly" defense in the "history of corporate America." 

Ackman, who runs Pershing Square, has teamed up with Valeant to pursue a hostile takeover bid for the maker of Botox. 

Here's the full letter: 

To the Board of Directors of Allergan:

It has been nearly five months since Valeant proposed to merge with Allergan. During this period, Allergan has distinguished itself in running the most shareholder-unfriendly, hostile defense process perhaps in the history of corporate America. In doing so, Allergan has wasted corporate resources, poisoned its relationship with its shareholders, and destroyed shareholder value.

Just this past week, we delivered consents from a third of Allergan shareholders to call a special meeting. This one-third participation vastly understates shareholder sentiment on this issue. I note that six of the top 10 shareholders participated in the consent process, which is remarkable in light of the extraordinarily burdensome, inappropriate, and unprecedented requirements to call a meeting, particularly for these large institutions for which your bylaws create even more cumbersome disclosure requirements.

Since the bid was announced in April, 75% of Allergan’s shareholders have sold all or a portion of their investment including the Company’s largest shareholder, which has sold its entire position. These shareholders are sending the board a message. They would not have sold if they believed that Allergan stock was worth more than current values. Just prior to the bid, David Pyott sold $31 million of stock and other senior executives sold $57 million of stock in the low $120s per share, voting with their wallets on the Company’s value.

Allergan has repeatedly, unfairly, and inaccurately attacked Valeant’s business and accounting practices. Valeant has responded to each of these attacks with direct factual responses specifically rebutting each of the expressed assertions. When enough was enough, we and Valeant filed formal complaints with U.S. and Canadian regulators. We thought then that perhaps the manipulative and misleading attacks would end.

Just last week, however, you again attacked Valeant’s business – making many of the same false and misleading accusations you had before, but this time in a filing with a federal court in California, and with a contemporaneous press release encouraging shareholders to review the filing. It appears that you did so as a public relations tactic knowing full well you could libel Valeant in your legal papers because California law protects a litigant from libel for any statements made in a court filing. I have attached a copy of Valeant’s latest response to your inappropriate attacks and a link here:

http://www.valeant.com/Portals/25/PDF/09082014%20AGN%20rebuttal.pdf

I encourage you to read Valeant’s responses carefully so that you understand the facts. These false and misleading attacks serve only to further discredit management and the board.

You have sued Pershing Square, Valeant, and me personally, and publicly accused us of violating the law and of “misconduct” with no basis in fact for this litigation. You did so after your own counsel (prior to it being hired by Allergan) had sent a memo to its clients explaining that neither we nor Valeant had violated any laws in purchasing shares or in connection with the tender offer rules. It is clear from the timing of the lawsuit – literally days before you knew that we were about to deliver consents from your largest shareholders to call a special meeting – that this was yet another attempt to frustrate the Company’s shareholders’ opportunity to express their views on the board, the bylaws, and the Valeant transaction.

To make matters worse, Mr. Pyott has repeatedly threatened and, according to press reports, has actually attempted to do a ten plus billion dollar deal before the special meeting which will not offer any synergies of any consequence. His motives are clear: to try to stymie a transaction regardless of the cost to shareholders.

You are fiduciaries for a $50 billion asset. Your actions have wasted corporate resources, delayed enormous potential value creation for shareholders, and are professionally and personally embarrassing for you. Based on your actions to date, many shareholders have expressed to us their concern that the board and management would rather destroy the Company than do what is in the best interests of shareholders, and that if the Valeant deal does not go through, Allergan stock will decline significantly. As importantly, your and management’s behavior is destructive to morale at Allergan and will likely lead to a flight of the best talent at the Company while the business remains in limbo.

We note CFO Jeff Edwards recent decision to retire from the Company at age 53 for family reasons, and his replacement by an investor relations executive rather than an experienced public company CFO. The notion that Allergan should execute the largest acquisition in its history led by an investor relations executive is a frightening proposition. While we respect an executive’s need to retire from a company for family reasons, Mr. Edwards exit also calls into question the Company’s forward earnings guidance which shareholders expected him to execute on when the Company presented these projections on July 21st.

There have been numerous examples of consensual and unsolicited transactions of scale that have been announced during the pendency of this transaction. In contrast, these other managements and boards have acted prudently and professionally, have maximized value for their shareholders, and have not stooped to attack the acquirers or attempted to stop or delay their shareholders’ opportunity to express their views on a transaction. Instead, they have obtained independent advice – that is, advisors hired to represent the independent directors separately from management – and worked prudently to consider alternative transactions while contemporaneously working to extract as much value for shareholders as they could achieve in the proposed transaction.

A large scale merger between two companies of similar size with substantial synergies is complicated and requires significant and detailed analysis. You have shown a remarkable lack of understanding about Valeant’s business based on the nature of your attacks. Your fiduciary obligations require you to fully inform yourselves about Valeant and this deal. Valeant has offered to engage and share confidential information with the board to address any concerns you may have. You have to date refused to do so.

I had expected that at some point one or more directors would have woken up and smelled the coffee. There is still time for a subset of directors to rescue their reputations by taking over leadership of this process from David Pyott and his handpicked advisors and doing what you are paid $400,000 per year to do on behalf of the Company’s owners. I have been hoping that to date that you had simply been uninformed and misled, and that the calling of a special meeting by many of your largest, most important and long-standing shareholders coupled with the harsh rebuke you have received from both ISS and Glass Lewis would jolt you out of your stupor.

The smell of strong brew is in the air. Now is the time to wake up.

"Mr. Ackman’s hyperbole, bluster and personal attacks do not change the fact that Valeant’s offer is grossly inadequate and substantially undervalues Allergan. We recognize that what matters is value, and the Allergan Board remains confident in the Company’s ability to deliver significantly more value than Valeant's offer," An Allegan spokesman responded in an emailed statement. 

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Bill Ackman is still on top this year.

Reuters reports that his hedge fund Pershing Square returned 1.4% in September, bringing its year to date return up to 31.5%.

Ackman's most active positions include a big short of Herbalife, which fluctuates between losing him money and going flat; a stake in pharmaceutical company Allergan; and huge stakes in Fannie Mae and Freddie Mac — Pershing is the largest shareholder in both stocks. 

Fannie and Freddie took a bath this week when a lawsuit to allow shareholders to share in the companies' profits ruled out of his favor — both stocks declined up to 40%.

As for Allergan, we'll just have to wait to see how things shake out. Ackman has teamed up with another pharmaceutical company, Valeant, to take over the company. So far Allergan isn't biting.

But the game isn't over yet.

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Pharmaceutical company Allergan is still showing no signs of going quietly.

Bill Ackman and fellow pharmaceutical company Valeant have once again raised their bid for the company, continuing a saga that has gone on since April, when Ackman and Valeant first announced that they would try to acquire Allergan.

This is the third time the duo have raised their bid, bringing it up to $191 a share or $56 billion in cash from the original bid of $177 a share or $47 billion.

A lack of significant movement in both Valeant and Allergan's stocks after this announcements suggests that the market isn't convinced this is the final move. There are a bunch of serious questions lingering about how much Valeant can pay, what the law will allow given the way this deal was structured, and whether or not some other pharmaceutical company might come in and ruin the party for Ackman and Valeant.

First thing's first — can Valeant afford to go higher?

In an interview on Bloomberg TV Ackman said in no uncertain terms that Valeant CEO Mike Pearson would not overpay for the company.

"As much as an Allergan shareholder, you would say, oh, I want the acquirer to overpay for me, when your acquirer is paying in stock, what you want them to do is you want them to overpay for you they day they buy you and thereafter, never overpay for anything again," he said. "And the problem is it doesn't work that way. The CEO is prepared to pay for you is a CEO whose stock you do not want to own an interest in. And I think what Mike is saying, I think what he has demonstrated is that being a disciplined acquirer, offering full and fair value but not overpaying, has enabled him to do 100-odd transactions over six years."

But at a certain point, this deal will become to expensive for Valeant, and it could be that Allergan is counting on that. From the beginning Allergan has pushed Valeant away arguing that it has no real growth, that it merely cuts research and development from the companies it acquires and sells their popular products — in Allergan's case Botox, for example — at a lower price, boosting sales without really boosting profits.

In the meantime, Allergan is challenging the entire deal in Court. Its latest attempt to shut the deal down happened earlier this week, when it filed a motion in California that would not allow Ackman to vote his 10% share in Allergan at December's shareholder meeting.

Ackman acquired 10% of Allergan before announcing that he was teaming up with Valeant to do this deal — the first time a hedge fund and a company ever teamed up to do a corporate takeover. Regulators are investigating whether or not there was insider trading involved there, and Allergan is suing Valeant and Ackman on the same basis.

While all of this is going on, there's still the possibility that another buyer interested in Allergan — one without the legal issues or the controversy surrounding its profit — could step into the game.

According to Reuters, Actavis is talking to Allergan about possibly buying the company. Nothing formal has been offered, but given how difficult Allergan is making this deal for Ackman and Valeant, the fact that talks are happening at all isn't the surprising. Activis could be Allergan's white knight.

And Allergan's white knight is Bill Ackman's headache.

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Bill Ackman's Pershing Square Holdings began trading in Amsterdam today.

Ackman, the CEO of Pershing Square Capital Management, compared his investment strategy to Warren Buffett's Berkshire Hathaway. 

"We do not even called them trades. No, I mean, they're investments,"Ackman told Bloomberg News Hans Nichols in an interview this morning.

"Pershing Square Holdings, we think of it like an investment holding company.  We are not Berkshire Hathaway, but I think that's not a bad business model.  You think about a long duration investment strategy.  We will only invest in the public markets but we will buy large stakes in public companies like we did in the past.  This will enable us to have a capital base that matches the duration of our investments."

Ackman uses an activist investing strategy where he takes large stakes in companies and advocates for change from management in an effort to unlock shareholder value. He sees himself more as a Buffett than an Icahn, though. 

"I think — I think that's a better choice.  I mean, I'm friendly with Mr. Icahn and he's done a fabulous job but in terms of investment strategy, we're much more like Berkshire Hathaway than Icahn."

That's not really a swipe at Icahn, though. Ackman and Icahn were rivals for many years. They engaged in a nasty public fight live on CNBC with Icahn hurling insults at Ackman. They made up this summer and hugged it out on stage at a conference. 

It's well-known that Ackman has been a fan of Buffett for years. He's compared his investment strategy to the "Oracle of Omaha" before.  He has also recommended that people in the hedge fund space read all of Buffett's shareholder letters. He also has his analysts at Pershing Square read books on Buffett.

Ackman said that he plans to use that capital to take a stake in a U.S. publicly traded company. He said that investment will be unveiled in the next 45 to 60 days. 

Watch the Bloomberg TV clip below: 

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Activist investor Bill Ackman, the chief executive of Pershing Square Capital Management, is having a huge year in terms of performance. 

According to Bloomberg News' Kelly Bit, Pershing Square is up 33% for the year.

Pershing Square's performance was 0.7% in October, a wild month for the financial markets. 

Overall, most fund managers have been struggling to find alpha this year. Meanwhile, the S&P is up around 9.5%.

Ackman is known for being a mostly long-only investor. He takes large positions in a handful of companies he thinks are undervalued and advocates for changes from management to unlock shareholder value.

While he is mostly long, he is famously short Herbalife — a multilevel marketing company that sells weight-loss shakes. Ackman has been crusading against Herbalife for 23 months with a belief the company operates as a "pyramid scheme." He's betting the stock will fall to zero. 

This year has also been a comeback for Ackman. In 2013, he had a disastrous bet in the embattled retailer J.C. Penney Co., and Herbalife's stock rose spectacularly. He finished that year slightly under 10%, while the S&P rose 30%. 

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Hedge-fund manager Bill Ackman of Pershing Square was just on Bloomberg TV's "Market Makers," talking about his infamous Herbalife short.

"We've actually come up with some new stuff," Ackman said before showing a clip of an internal Herbalife video from 2005 he says shows deceptive recruiting practices.  

According to Ackman, the video shows one of Herbalife's top distributors speaking, and it makes the company look pretty bad. It's a three-hour long presentation (you can watch a short clip below). 

Perhaps that's fitting for a crusade that's lasted two years, like Ackman's crusade against Herbalife has.

In December 2012, Ackman gave a 342-slide presentation publicly declaring that he was short $1 billion worth of Herbalife shares. Ackman believes that the company operates as a pyramid scheme that targets poor people, especially those from the Hispanic population.

His investment thesis is predicated on regulators, specifically the Federal Trade Commission, shutting the company down. (The FTC opened an investigation into the company back in March of this year.)

Ackman is shorting the company to $0. He has said that he will take this short to the "end of the earth." 

After Ackman's initial presentation, numerous fund managers, most notably Ackman's longtime rival Carl Icahn, piled on by going long the stock. 

Herbalife stock also surged in the months that followed. In October 2013, Ackman had to change the form of his short position. He said he covered a big chunk of the short and bought put options. He said this has "increased the potential for profit, but reduced the amount of capital at risk." 

The position is about 7% of Pershing's portfolio. At its peak, it was 15%. "But the opportunity for profit is greater than it was at the peak," Ackman said. 

It has definitely been a crazy ride up and down for the last two years. 

Shares of Herbalife have fallen about 50% this year. It looks like Ackman is back in the money. The stock was last trading down 2.6% during Ackman's interview on Bloomberg. 

Ackman said that the risk/reward looks more appealing now. He said the risk of the stock going to $50, $60 or $70 has "gone down enormously." He said he thinks the business is "deteriorating" and there's no longer a bull case for the stock. 

This summer, Ackman and Icahn made up after a decade-long rivalry. Icahn has said he hasn't sold a single share. 

Ackman told Bloomberg he has not had a recent conversation with Icahn. 

"Unfortunately, I think he's kind of stuck," he said, pointing out that Icahn is on the board of Herbalife and can't sell. 

Still, Ackman said, "I'd love to see him sell. I think it would be great to see him sell ... I think he's a stuck holder." 

He said Icahn would be fine, though. 

Here's the new video: 

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