Reports have surfaced that Carl Icahn was trying to sell his Herbalife Ltd. (NYSE:HLF) shares prior to him deciding to buy more. In fact, Bill Ackman claimed he was contacted by Jefferies about buying some of those shares. Bill Ackman is heavily short Herbalife while Carl Icahn is long. There has been an ongoing fued between the two.
Smart investors need to be wondering if Carl Icahn was shopping his position and unable to sell it for a decent price. Did he then turn around and think buying more would create an artificial demand reaction, potentially driving the price substantially higher and creating buyers?
If this is the case, it is very troubling. If there are no significant buyers of $1 million shares at a price you are happy with, buying another 1 million shares and thinking you will find buyers for 2 millions shares is fantasy. It also brings into the equation the ego of Carl Icahn, thinking he can manipulate the market enough to single-handedly create enough interest to buy his now bigger position.
In my experience, you need a fundmental reason to buy a stock. Believing you can pump then dump the position is not reason enough to load the boat even more.