Ackman vs. Icahn: The Live CNBC Showdown

Summary

On January 25, 2013, CNBC's Scott Wapner was interviewing Bill Ackman about his Herbalife short when Carl Icahn called in live. What followed was nearly thirty minutes of unscripted television: a grudge match that began with a 2003 Hallwood Realty deal, detoured through MBIA, Elliott Spitzer, and "schmuck insurance," and only occasionally touched the Herbalife thesis that had prompted the segment. Icahn called Ackman "the crybaby in the schoolyard" and "a liar"; Ackman called Icahn a bully who does not keep his word and who tried to exploit Pershing Square's weakest moment. The host repeatedly tried to bring the conversation back to whether Icahn was long Herbalife; Icahn refused to say, then said he would talk about it only on his own terms. The exchange became the most watched clip in financial-media history and turned a contested short thesis into a personal duel between two billionaires.

Full Text

Machine-generated transcript (ASR); minor transcription errors may exist. Speaker turns and paragraphing restored editorially — words unchanged.

Interviewer:

all right welcome back to the halftime report live today from the New York Stock Exchange we've been speaking with hedge fund investor Bill Ackman now it's time to hear what Carl Icahn thinks of our conversation he joins us live on the phone gentlemen let me just make sure I have both of you with us just for technical purposes Carl are you there bill there yeah I'm here I am here as well you know Carl we've been speaking with Bill for the last several minutes following the accusations that you made yesterday and he's essentially saying that you're a hypocrite Carl in your argument that you've laid out short positions yourself publicly how do you respond well you know

Carl Icahn:

listen I you know I I really sort of had it with this guy act man yeah you know uh why don't we go back over a little history with him you know I'm not gonna get into you know talking about short positions as much as maybe you'd like me to but it would start out with my history with this guy I was minding my own business and in 2003 I get a call from this acting guy and I'm telling you he's like the crybaby in the schoolyard you know I went to a touch school in Queens that used to beat up the little Jewish boys and he was like what his little Jewish boys crying that the world was taking advantage of him it was almost thought it and he's in my office talking about this how would and how I can help him and you know it's like in the old song you rue the day I ever met the guy and so he's there and talking about this company and I actually called a friend who knew him and the friend says don't deal with the guy he's a major major trouble and and I you know I'll just read to you some of the stuff they were saying about him and uh you know this was an article the New York Times these guys had received an important amount of requests for investments asking for their money back he had suffered a devastating setback and then you know does this remind you of anything this article says Gotham's publications of upbeat research about one company even as the fund was quietly selling the chairs look very much like a classic pump and dump scheme and then it goes on to say Elliott Spitzer

New York State Attorney General had been investigating Gotham his principles and their activities and then it goes on to say that this SEC is looking into them and you know I really did I gotta admit I really didn't read this so I got involved with this acting guy and it cost me it costs me money I because it cost you money Carl because the court said that you reneged on an agreement that you guys had right and a court repeatedly said that well let me just say one thing I will tell you and I've done stuff for the 70s and 80s on a handshake and I will tell you categorically Ackman knew that he wasn't going to get half the profits this guy was in such trouble he was in no position to ask for anything at the very end of the deal of war we sizes you got to do me a favor and sign something called schmuck insurance so that if you flipped the stock if you flipped the stock gain I get half the profits and I said hey I I said to him my bill I'm not gonna flip the stock I'm gonna make a tender offer for it and I did and and I said and the company's gonna find another buyer or I'll buy it so you're not going to get any property so I realized that I just got to show my investors and he only had one or two left maybe by that time god knows what he had left and he's I got to show my investors that are making money and all that crap and at the end we wrote it and my lawyer is a great lawyer he's with me 20 years still with me we wrote it and said and we still think out what we said is

right but he but back but it got a New York Court to agree that the fact that they took it away from us we never sold it they took the stock away we voted against the deal and they took it away I was amazed with Ahmed Kobe I really was even though by that time I realized he's the quintessential example that on Wall Street if you want a friend get a dog because that's the car I mean the thought about I know I got out of said I mean in rehashing the last you know a decade in which a court repeatedly sided with Bill Ackman I mean let's get back to the substance of the conversation you have an

Interviewer:

issue with way that bill went about the Herbalife short as aggressive and as publicly as he did and I'd like to give bill a chance to respond to you as well I would love that bill please should I go

Bill Ackman:

ahead yeah okay so look I think what you should I would encourage you invited Eliot Spitzer on the show and Eliot Spitzer was our Attorney General back then and he investigated some accusations and unfortunately the press can write articles that say whatever the press wants to say but ultimately we were what's interesting is ten years ago I was short a company called MBIA and I went out very publicly criticizing MDI A's Triple A rating I wrote a 66 page white paper it's called is MBI a triple-a I encourage you to read it and find it on the Internet and I said that this company that had a triple-a rating from the rating agencies this basically didn't deserve the rating and that was had taken an ordinate risk with subprime CDOs and a bunch of other exposures and could catalyze a credit crisis and MBIA came after me very aggressively as Herbalife has come after us very aggressively accused me of market manipulation they contacted the treasurer of the state of New York the treasurer of the state of New York called Eliot Spitzer's office and said hey there's an evil hedge fund guy attacking our company saying we don't deserve aa triple-a rating by the way we're the biggest guarantor of New York State and City bonds you might want to go take a look at this guy and Elliott you know follow that lead it's a perfectly legitimate lead and he looked into it and he investigated whether we were correct and we were I testified five or six days on the record explaining bond insurance and

accounting and reserving and why 151 leverage one levered company didn't serve a triple-a rating and ultimately that they concluded we had done nothing wrong and if you can call Elliott up himself and he'll tell you the facts and I actually got to know him after that and and have a nice relationship but they're not a close one but a nice relationship anyway so during this period as a result of my decision to wind down the fund we we had a court case go against us in a merger that was ultimately reversed on appeal I'm happy to is a book about this whole story called confidence game which is worth a read apologize we're winding down the fund we were under no pressure to wind down the fun in fact I last tiny little apps that we still have our goal with the maximize the outcome for our investors I never went to Carl's office to pitch him on Hall with Realty we did the transaction over the phone and I'll get into that in a second we had two bids for our deal with Carl Icahn one was at a higher price it was all cash I told Carl that I would do a deal with him I had confidence you could extract the value in a company it was worth more than twice the price it was trading for and that's why Carl agreed to pay me $80 a share in cash which was less than what we could have gotten selling we could have sold a position for 90 bucks to someone else or 85 I remember the exact number but with Carl I got $80 plus what he called schmuck insurance me again who figured that the schmuck insurance

terminology released Carl Icahn it was 50% of his profit if he sold in three years and the risk to us was that Carl got the company if Carl bid for the company and got it we get nothing but if someone else who had a lower cost of capital and Carl ended up with the company then Carl would have to pay us as long as the deal happen in three years and I thought he might just wait three years before making a bid or just hold the thing up so we wouldn't gotten didn't get paid that was the risk to us now I was concerned about dealing with Carl Icahn because Carl Icahn unfortunate does not have a good reputation for being a handshake guy and if you notice the agreement that was written I insisted we keep it under 10 pages there's a simple example in the agreement you never see a lawyer lawyers I told the lawyers I want to put an example no no don't put an example in you know we'll just use words is that we can use words but I wanna have an example I want to make sure there's no confusion here when Carl says this transaction was a merger okay what happened in this transaction is the company called bid $100 a share for the company the company hired Morgan Stanley to sell the company Carl raised his bid to $120 a share and the company made a deal to sell to a regis cost of capital is lower than Carl's he got they got 136 dollars a share for the company and the transaction was structured as a cash out merger stick with me because this is important in Carl is Ben maligning my reputation

so it's very important we get to the facts all of this is provable in the courts okay so let me just finish and the transactions were cashed out in a cash up murder okay Carl got cash free shares he no longer has the shares and very clear okay Carl made all kinds of arguments saying he didn't do it voluntarily that's true but our agreement never said voluntarily it said if he sold or otherwise transferred why did we say sell or otherwise transfer because we wanted this to be the blow artists possible reading that some that Carl couldn't work his way around the agreement I've got a few more points to make stick with me for one more second okay I like you had one more second because I mean look we can we can go back to the whole merits of the case as I mentioned I think this stuff is important okay because again when someone goes on TV and tries to slander your reputation I think you have an obligation offer given a proper opportunity to respond fair enough Carl by the way made a lot of money with us okay he bought the stock from us at eighty he sold up to one hundred and three hundred thirty-six dollars a share okay when I when I didn't get paid within two business days I was supposed to get paid after the deal closed I called called up I congratulated them on the deal and he said what deal and he and I explained it to him he says no no I didn't agree to that I said Carl we have a 10-page agreement it's a really simple agreement I don't you know he said I'm not going to pay

you I said well you know that I'm gonna have to sue you and just go ahead sue me won't survive suffering judgment I said Carl we're going to get summary judgment we did get summary judgment you know what he said to me does Bill you know we're gonna work I'm going to sue you okay and he threatened to sue me okay and why did he threaten to sue me why was he doing what he used a bully okay I was not in a very good place in my business career I was under investigation by Eliot Spitzer I was winding down my fund there was negative press about Gotham partners at the time I was short MBIA they were very aggressively attacking me in the press and Carl Icahn thought you know what disguise roadkill on the hedge fund highway I'm never gonna have to worry about this kid again he's not gonna even have the resources to sue me so I'm just not going to pay him and by the way the number of stories I have heard from bankers from lawyers from people he's transacted which with where he's done similar kinds of things to take advantage of someone well the fortunate thing in life is I told Carl I would go to the end of the earth to make sure he paid my investors this was not my money these were my investors money every penny that he owed being with interest and we got and I went to the end of the day he tried to settle with me he offered ten million dollars to my favorite charity over a dinner that we I mean our Italian restaurant I know his name goodbye

Interviewer:

hello so again I think this is not a great use of CNBC air time well let's listen to is this is not

Bill Ackman:

an honest guy and this is not a guy who keeps his word and some guy picks Tector advantage of little people that's what let's let's make good use of it there better use of it then I'm Carl

Interviewer:

why don't why don't you just come clean on the Herbalife thing are you long or not right I mean

Carl Icahn:

the whole market knows where it is especially or I didn't get on I didn't get on to be bullied by you ok if I could talk let me talk but I don't need you to hello yeah I'm here I know what no-one's bullying your Karl I mean I'm just you know you're the one who called in to our show to talk to Bill Ackman and the pay personal issue is the Herbalife thing hey hey listen to me I was called in by Max Maya to have a conversation not to argue with you alright if you if you want to take hello yeah we're listening well if you listening let me talk I did you know I want to say what I want to say and I'm not going to talk about my Herbalife position because you want to bully me alright not bullying you I'm asking the question everybody wants to know Carl that's all but if you make this to win you want to know I'm gonna talk about what I want to talk about and I want to take that position I'll never go on CNBC you know so you can say what the hell you want I'm gonna tell you I'm gonna talk about what Ackman just said about me not about Herbalife but I'll talk about her of life when I want to not when you ask me okay I'm never going on a show with you again that's for damn sure okay so let's start with what I want to say Ackman is a liar okay to begin with I've lived my life from 1960s and 70s by handshakes I almost lost my firm a few times by handshakes Ackman has a house does pump and um he's got one of the worst reputations on Wall Street and I'm good at ideas Herbalife is a classic

example of what he does let's look at Herbalife Ackman was doing badly in 2012 he was down to 3% he probably woke up in the morning said let's see what company we can't destroy and put out a bear raid on it happen from the lid from the late 80s till now and go to a bear raid til the stock and now could show our investors we made more money and by the way if we could mark these things that make more money he says he's not taking the profit but that gives him a better a better rate of return for himself Ackman has done that if you read the articles about him he's done it all his life and I will swear to you it I don't I don't need we didn't make a lot of money on this crazy thing I did with him we made four million but I was incensed because I will cut you that without question I will swear to it on any Bible you want that I had a verbal agreement with him that he was not going to get any piece of the money at at the end he was as he said he was a major major trouble and he's basically lying he was a major trouble and he said look I'm not going to take any of the profits but there's one thing I will do I don't want you to just flip in the stock in a couple of weeks a couple of months or whatever it was and therefore put that in we didn't flip the stock the agreement we thought unfortunately said that it only applies to flip in the stock and unfortunately the agreement wasn't well ripped my lawyers a great lawyer but with this one was missed so we go in into that I don't tell

you something as far as I'm concerned he wanted to have dinner once with me I had dinner with him and I gotta tell you I left I couldn't figure out if he was the most sanctimonious guy I ever met my life or the most arrogant and that Ackman and that's the last time I met with the guy I don't want to meet without ya when it comes to France he called me and said hey I'd like you know we were friends we could make a lot of money invested together and I I knew that even if I wasn't friend I never would invest with this guy because I tell you the guy takes in what at risk Carlin let me let me let me audition if I may hell I want to say you let you let Ackman torture let me talk are you been talking okay you can continue okay thank you and I will tell you that Ackman takes in one in at risk he he goes short 20% of a company goes out there and I'll tell you this could be the mother of oil Schwartz squeezes and and I'm gonna tell you this that one day is somebody it's somebody 10th is for this company and wants all this stock back what's active occur to do it's going to be just you know history repeats itself he'll be back where he was in 2003 with all the guys redeeming and where is he going to get the money in the stock for that but that's not even my issue I don't I don't have an investable back but I wouldn't have an investment with Ackman if you paid me to do it it's Ackman pay me to do it and and you know ACMA's reputation is second to none nobody nobody Wolff as far as I was

concerned I made a huge mistake getting involved with him and what is even worse than after even one you know everyone he planted some article the New York Times pounded his chest for telling hell on the world how great he was and you know as far as I'm concerned the guy is a major loser you know there's really one set is really one said about somebody that spoke to the Parliament a young guy spoke diplomas young man I'd be happy I'd be happy if I could be sure of one thing in my life is you assure of everything if you have a listen act meant he'll tell you what to do how to do it we had to go I was dizzy after having dinner with them yes we won't give you money what you should do okay listen it's time to keep going over it but I will tell you one day yeah I think H al F to be the mother of all short squeezes that's that's not me saying it but Ahmed did it look at the timing Ackman did it with a week to go or a month to go before he had to show in his results his results were bad for 2012 and this got his results up double so he could get fees for himself and then he talks about charity that's complete bull he's not giving it to charity he's like is limited why aren't going to give it to charity as assuming had only charities themselves now there are all the bad actor okay let me let

Interviewer:

me remind you that we are on live television so that was an interesting choice of words but let me let me do this let me do this I mean and the guys on the trading floor down here at the New York Stock Exchange clearly appreciated as well just address a few specific things because if

Bill Ackman:

it'll be can I just say a couple things in the add-on eyes last thing just to clear the record okay so Pershing Square was not having a bad year in 2012 and Herbalife did not double our returns okay so it's just sis alright I can't hear what you said bill I'm sorry again Carl you and I can talk offline we're wasting the world's time on this thing okay so I I think that Carl either has a very very bad memory or his trouble with the truth we have a very flee because we didn't make a verbal agreement on Hollywood we made a written one who's got very good lawyers as he says I act just read the agreement agreement we put on the web at the pen page agreement Carl can say what he wants today about what he thought he said back then but this was much more important to me than it was to Carl and obviously we read the agreement Carl's a big boy he signed the agreement and then we had several courts conclude that we were right and he held us up as long as he could big issue about Carl Icahn is he's not used to someone standing up to him and I and particularly a little guy like me in 2003 it was in a difficult spot and by the way we did nothing wrong but we criticized a big public company and they had more resources than we did they made our life very miserable we were investigated a benefit of investigation is we were exonerated ultimately we got our do on MBIA the world realized we were right the stock went from 70s but you know single dollars for share the concede es went to a couple

thousand basis points and we made a lot of money for our investors and I gave 150 million dollars which was my share of the profits from the MBIA investment to the Pershing Square Foundation we've given way more than that I'm going to do the same thing all over again with Herbalife okay herb life is going to try to attack my integrity Carl can try to orchestrate a short squeeze you can do whatever he wants okay you can try to scare my investors from investing with me which it sounds like he's attempting to do on this call we take prudent risks at Pershing Square we're an unlevered fund and we are very thoughtful in the way that we do our business I'm going to end my you know I told Carl after the whole thing called me up and he literally said you know bill we can be friends now okay I wish I had a recording in the conversation I simply said to him I said look Carl you are no friend of and and that was it and and every time so he goes on three I'm going to dive in right sir I never said that I want to be friends with with you bill I would any party girl and I wait you say you'd like to be friends so that we could have s

Carl Icahn:

together I have no interest you think I want to invest with you okay let's live with lives with you let's move our spin on earth let's move on

Interviewer:

Carl Carl let me let me just ask you to I mean that the crux of the the argument doesn't really go back or doesn't so much focus on ten years ago or maybe it does it focuses on the most recent history and that is Bill Ackman's short play on herbal life you criticize him quite heavily for the way in which he he went public with the short would you be willing to admit that in the past I mean look you've got sharp elbows as well you've got weight to throw around to that if that's the way the short world isn't it Carl hey listen if

Carl Icahn:

I'm putting admit it I'm not gonna that I won't stock I'm not going to admit it with a guy like you on that TV because I don't think you've been handled as fairly I think you're trying to attack me and bully me into admitting something and so you expect me to do it on your show no I'm not I'd like to ask you a question if you can't get a bully me into doing it it seemed like a nice enough guy I don't think I've ever been on a show with you but I don't think I take the bullion so I'm thinking me office yeah yeah bike spire said I could say what I wanted on the show so I'm saying it all right hey listen we'll send max in the other Bell fit it on your show we have to use try bullying me and come out okay up against we do you all right well I mean I'm known hey look hey Carl what let me just say first support well let me say Carl I don't like being bullied but I am NOT I have nobody here nobody here is bullying you first and foremost second of all well I simply asked you I said let me finish please I simply asked you didn't thought I sympathize ten years ago why the heck are you getting involved in it I I simply asked you to reveal whether you were long Herbalife as the world wants to know and the motives behind it that's all that we want to know that's what every person watching this program - no and if that position is in all can I answer could I answer that what you want to keep talking I'm gonna yeah max fine throw me up he said Ackman is making all these aspersions about

you he's going to come on saying you the worst man of the world you want to go on TV I said yeah that's why I came on but I'm going to cut you a better Herbalife I don't tell you what I will tell you and what I said before uh uh you know I think Eggman dinner of a life because I don't I obviously don't like Ahmed Ahmed is lying about what happened I didn't need the four million bucks I made there what it sense me was that he weaseled out of the deal and will leave that alone you're right half a ten years ago leave it alone but he weaseled out of it and I'll tell you that but and you know I'm known as a tough guy but I think if you take my handshake you live by it there's nobody said that I ever went back on a handshake so now let's go back into Herbalife actually I am reading again what was in the New York Times by a magazine in The Times and says that she said that that he does that the Gotham's publication of be researched but publication of up B research about one company even as the fund was quietly selling the chairs now that's what he did that's what the paper said and right now I believe I'm not going to the SEC or the FTC but I believe he goes out he has 300 people in a room this is the typical Ackman I wouldn't care if it was anybody else but Ackman but he goes into this room and he gets 300 people and he tells them how bad this company is it's a classic stuff they did in the 90s you scare the hell out of people get the stock down he marks the stock on December 31st

and makes 600 million bucks on paper and tells the world how great he is he's given to charity and shows the world he's bait 12 percent which isn't so great anyway I'd like to say we make 28 percent last year without going and having to go pump and dump stocks and having to go and have rooms full of people and and in 2011 I the risk of being too modest we made 33% without having to do what I consider to be manipulation okay that's what he did in Herbalife and if it wasn't if it wasn't act men I wouldn't give it you know I'm not here to change the world but this is what he did he got a bunch of innocent investors retirees they're gonna lose their money so Acme could show a good record at the end of the year and by the way took an inordinate risk because it a company like Herbalife you could ask almost any pro you don't go 20% and but what the hell he's not risking his money is risking his investors money you go in and you that 20% and if there's ever a short squeeze which well might be in Herbalife what the hell does he do I'd like them to answer where does he get the stock to when they call back while the stock let's say there's a tender offer Herbalife and they call back to stock and if you know you know Wall Street but there's a tender offer everybody calls back to stock your bar and if they have it does if that's fact the rush to 100 what the health is acting to I've asked him but he's on the fall he's right here on the phone I'm happy every day I get a chance there

Interviewer:

should be a short squeeze okay a couple couple of interesting things number one bill let me just say quick we have to be quick as we're at the end of our our road here okay okay so number one Carl's

Bill Ackman:

free to make a tender offer for the company Carl you want to bid for the company go ahead and do

Carl Icahn:

for the pay hey you don't have to tell me what I'm free to do okay well maybe a number one number two

Bill Ackman:

obviously we don't think there's going to be a tender offer for the company we don't think this company is viable okay we don't think any persons going to write a check for five or six billion dollars to buy a business that we believe is fraudulent okay that's number one number two Carl Icahn says it doesn't like this behavior says it's bad meanwhile 2003 at the iris own conference in front of 500 people Carl Icahn pitched Trinity industries which he was short and he was short 22 percent of the outstanding shares according to Fortune magazine Carl you can tell us whether that's true or false but you did precisely that so I find it interesting that you have an issue with what we did in Herbalife in Herbalife we simply provided to the public full transparency on this investment 330 slides in detail not scaring people but going through the facts about the company okay we did exhaustive research over a year and a half beautiful we will be either proven right will be proven wrong okay we shorted the stock we have not covered our shares we believe in what we and we have more to come by the way so we we have some questions the company has given us the opportunity to ask and we will have responses for every issue they raised in their response of presentation to us and what I thank Carl for is he certainly helped highlight Herbalife and the issues at Herbalife and I guess as a Carl bought Herbalife if he did because that's what he someone had been leaked to the press and he flipped

it out when the stock went up and he made a good trade congratulations on a good trade I don't believe there's any real investor who can own this business long term because we believe it's a pyramid scheme we believe you can prove

Carl Icahn:

that to it reassert right hey I appreciate Bill that you called me a great investor I thank you for that unfortunately I can't say the same for you but I'd like to ask you congratulations on

Interviewer:

one good trade I sort of missed that let me guys we're gonna we're going to end it there bill I so much appreciate you coming on today Carl I hope you'll come back that's all I can say it was a good conversation and it wasn't anybody here that I heard I don't hear you tell me that you appreciated me coming on well I think it was obviously meant there when I said I hope you'll come back right I mean all right all right thanks very much I appreciate it and have a good day okay all right so Lachman Carl Icahn will get a break and then power lunch we'll pick up the ball

Key Themes

• Forensic Shorting — Ackman frames both the MBIA and Herbalife campaigns as public-interest forensic work: publishing research, inviting regulatory scrutiny, and letting the facts fall where they may
• Activist Premium — the clash is really a debate over what activism is for: exposing perceived fraud versus squeezing a rival's position
• Volatility vs. Permanent Loss — Ackman insists Pershing Square is unlevered and can withstand a short squeeze; Icahn argues the position itself is an existential risk to the fund
• Carl Icahn — the rivalry is the through-line of the Herbalife war; this broadcast made it public theater
• Portfolio Concentration — Icahn's attack centers on the danger of a single massive short position in a fund whose reputation depends on being right in public

Context & Significance

This is Act II, the golden era, but the mindset on display is not the calm conviction of the MBIA presentation or the CP Rail proxy fight. It is conviction under personal siege. Ackman is still near the top of his game — Allergan and the PSH listing are a year away, Valeant is not yet a crisis — but Herbalife has already become a public crusade, and Icahn's call-in turns the debate from evidence into character. The broadcast matters because it reveals how quickly a forensic short can become a reputation war, and how little the underlying analysis matters once two wealthy antagonists decide to fight in public.

The honest retrospective note is that neither man looks entirely rational here. Ackman, who later swore off public short-selling, is already showing why: a public short creates an enemy with unlimited time, capital, and incentive to humiliate you. Icahn, who claims to be on the show to defend his reputation, spends most of the time refusing to discuss the position everyone cares about and instead relitigating a decade-old deal he lost in court. The segment is great television and terrible risk management — a warning, visible in real time, that the activist premium can be overwhelmed by the activist ego.