“A lie told often enough becomes the truth” is an old quote often attributed to Vladimir Lenin, so it’s possible that Lenin is the original creator of the fake news trend.
There is a technique referred to as the “great lie” that is popular not only in Russia but China, too. First, make the lie big enough that people will believe part of it. Second, repeat it often enough, and you will have some people thoroughly convinced. And third, spin the lie in many different ways, and you will convince even more people. It’s no surprise that the American political system has fully embraced the “great lie” technique, but now it appears that the financial world has also learned to use fake news to manipulate the market for financial gain.
A recent analysis of real and fake news stories dominating the Internet during the last election cycle found fake news received more shares, reactions and comments over the final few months of the campaign then supposed real news stories from the New York Times, the Washington Post, and CNN. But fake news is really nothing new; it has been used not only by politicians but by investors looking to turn the market in their favor; Investors like Bill Ackman of Pershing Square Capital Management, that disseminate fake news to plant the seeds of doubt in any business they are looking to upend.
Back in 2012, Ackman set his sights on a company named Herbalife, even publicly presenting a PowerPoint explaining why the company would be in bankruptcy before long. For the last four years, Ackman has had a $1 billion short position in Herbalife stock. Various sources claim Ackman pays between $20 million to $100 million a year in carrying costs just to hold his position while he waits for Herbalife to fail so that he can make back his money. Ackman’s hedge fund is upside down on his position by as much as $500 million. But Herbalife hasn’t failed, and as a matter of fact, their stock price has risen 46% since December of 2012.
Ackman’s many public attacks on Herbalife had no real effect on the company so he had to try something different to reach his goal of bringing down a company that employs over 7,800 people just so he could prove he was right. He decided to jump even deeper into the world of fake news. Ackman has used sites like Seeking Alpha(SA) to spread misinformation and blatant lies. According to Seeking Alpha’s editor-in-chief Eli Hoffmann, one the core principles of the site is that of granting anonymity to the writers who request it. But financial investment advice from an anonymous source is a very dangerous thing.
One piece published in Seeking Alpha perpetuated the idea that Herbalife was guilty of operating an illegally organized business even after the Federal Trade Commission(FTC) had exonerated the company. The FTC found no guilt and Herbalife settled by paying a fine and agreeing to some minor changes in the way they practice business. Yet the article speculated that the Herbalife executives had either been so poorly advised by their legal team that they did not know they were operating in an illegal and unethical manner or they did know and willingly went along with the supposedly fraudulent behavior. After likening Herbalife to a collection of cockroaches, the author went on to examine “the cockroach effect.”
In another article on Seeking Alpha, the author was sure Herbalife’s stock prices would go down now that the FTC settlement statement had come out. There was no question in this author’s mind that the stock should be down, not up but that is exactly what happened. Herbalife stock surged nearly .0% by the following Friday after the FTC announcement. Ultimately, the stock has doubled since Ackman first told the world he was betting against the stock nearly four years ago.
The fake news has continued to pour into Seeking Alpha even after Ackman arch nemesis, Carl Icahn, founder and majority shareholder of Icahn Enterprises and Herbalife investor, purchased 2.3 million additional shares of the company. This purchase was made on the heels of Ackman’s rumors that Icahn was trying to dump his stock. So in other words even though Icahn bought another large block of Herbalife stock Ackman has some secret sense that he really wants to sell his stake in the company.
And so it goes, Herbalife continues to grow and prosper while Ackman and his ego will stop at nothing to bring the company down — even if it means he has to use anonymous sources and pen names to spread his fake news and destroy a successful company for his own financial gain.
