It's beginning to appear as if Bill Ackman couldn't have gotten Herbalife (HLF) any more wrong.
Not only have shares rocketed in the opposite direction of his roughly $1 billion short position, it now appears that two federal probes have turned up no evidence against the Los Angeles-based nutrition and weight-loss company, which Ackman has long maintained operated a pyramid scheme.
The door may be open for retaliation.
The drama between Ackman and Herbalife first began when the billionaire activist and CEO of hedge fund Pershing Square disclosed his firm's bearish position in Herbalife in December 2012, citing the business resembled a pyramid scheme worth little to nothing.
The announcement of his bearish position, estimated at roughly $1 billion, temporary pressured the stock down, but not before it tripled in value over the next year -- not exactly a good bet.
Then things to really heated up between Ackman and Herbalife CEO Michael Johnson: Ackman defended Pershing's stake as well as its accusations, while Johnson alleged Ackman was manipulating the markets by pressuring shares downward with unreasonable condemnation of the integrity of the firm's operations. This prompted federal and FBI probes into Ackman's actions, as well as probes into Herbalife's operation.
But now it appears that Herbalife, and possible Ackman, could be off the hook of any wrongdoing, as the probes -- one into Herbalife's model and one into whether Ackman's investments and assertions -- have turned up with inconclusive evidence (first reported by the Wall Street Journal).
While it's unclear whether the federal probes will be reopened, this may end up giving more fodder to Johnson's plea that the company's been unfairly targeted.
In either case, Ackman's vision of a pyramid scheme at Herbalife is more mirage than reality.