CNBCfix review: When the Wolves Bite
Scott Wapner’s incidental tale on recruiting the government could use a protein shake
Posted: Friday, May 11, 2018
It's a story without an angle — or even an ending.
Scott Wapner's When the Wolves Bite, while hardy and earnest, unfortunately peaks in Chapter 3, bottoms in Chapter 7, and lumbers toward a finish line that doesn't exist.
Bite is a chronicle of a Wall Street showdown. Wapner is indeed the right person to pursue this, having succeeded in bringing the opposing parties on air multiple times and earning a level of trust. But the showdown is not particularly sexy because 1) nobody was made or broken by it and 2) the parties declared a truce fairly early in the battle and 3) that battle nevertheless dragged on for a frustratingly long time for all involved. As Wapner began the project, it would've been a fair and serious question to ask aloud, Is there really a book here?
There is, deeply embedded in some of Wapner's pages.
Wapner, accidentally it seems, at times draws a beautiful contrast of America's wealth hierarchy. Notice that Bill Ackman and Carl Icahn, their associates and contemporaries, are Ivy Leaguers who make their money on Wall Street, while dropout/community college types might make their fortune in places such as Herbalife. Academic elites would seem to have the upper hand in society's race to the top until emotion is factored in: All the Ivy Leaguers promise is more money, while the Herbalife people promise a beautiful life. All of the parties are smart, savvy people who have — at least in certain instances — made a lot of wealth through controversial means. There's a quiet message here and not really from Wapner: Anybody can get rich, but you quite possibly, sometimes, will have to be an s.o.b.
Bite has to make one wonder if Harvard and Princeton produced any value added to the talents of Bill Ackman and Carl Icahn given how well the HLF CEOs have done financially without such mind-shaping.
Most Wall Street books, including the biographies, purport on some level to make the reader a better investor. Here's how Warren Buffett does it, etc. Finance tends to be a boring subject; why read about it unless such knowledge can boost your bottom line. Does Bite teach you anything about investing? Maybe that most stock traders are knuckleheads. Every time there's a headline on HLF, there's a massive move in the stock, duly noted by Wapner. Since Ackman's short at the end of 2012, HLF has had one bad year, 2014; the rest all pretty good, and at the time of the book's release, the stock was at an all-time high. Anyone ignoring the news reports and patiently adding shares during this time has made serious money; those playing headline wack-a-mole probably haven't.
Also, maybe there's a message that the best investments are under the radar. While the retail-investing public loads up (with good reason) on the hottest Silicon Valley stocks of the week/month/year, Bite indicates that people such as Ackman and Icahn tend to make money on fairly obscure companies. The deal that caused their feud involved Hallwood Realty, which virtually no one has heard of, actually a highly successful enterprise for both parties.
But that's below the surface. Unwilling to opine, Wapner fails to find a voice, clumsily gets bogged down in halfhearted formalities and shuns what could've been a valiant effort to turn the Herbalife war into another Barbarians at the Gate, one of the best business books. He stumbles through storylines people don't care about and ignores things that they should. Wapner is a TV host. Writing is not his meal ticket. Unlike the Barbarians authors (Bryan Burrough and John Helyar), Wapner hopes to continue receiving semi-regular television appearances from his subjects. At times, his prose is effective. He refreshingly calls himself an "unproven author." But his passages attract clutter. Too often, they feel like spare parts. Instead of telling a good story, Wapner leans toward research-like material, tacking on 16 pages of citations at the end. Wapner flirts far too closely with the weakest type of book, a timeline. Numbers (particularly the percentage rise or fall of Herbalife on any of a dozen or so different days) and press releases are scraped up whenever the narrative runs dry. Eventually, readers are wondering what in the world HLF has to do with VRX or Dan Loeb, let alone Jerry Yang or MBIA or JCPenney.
Whether hosting TV shows or writing a book, Wapner, like most people, is at his most likable when focused, head down, churning through the material. It's when he pauses and thinks "I could be cool here" that the production stalls with eye-rolling references. Rather than give the writing a chance to bring whatever narrative exists here to life, Wapner sprinkles the text awkwardly with profanity steroids, including his phrasing in Chapter 6 ("Johnson had f----- up, and he knew it ...") and Chapter 7 ("sticking it up Ackman's ass") and Chapter 8 ("Bill Ackman, it seemed, had f----- him."). Wapner used the actual letters rather than hyphens after the "f." This from a guy who refers to Eliot Spitzer as "Mr."
Wapner stumbles out of the gate. Let's start with the cover. What exactly does this title, When the Wolves Bite, mean? Wapner indicates that it's part of the title of a 133-page (Zzzzzzzz) paper written by Delaware Supreme Court Chief Justice Leo E. Strine on activist hedge funds in the Yale Law Journal. That paper criticized activist investors for typically seeking short-lived stock pops for the benefit of shareholders rather than longer-term change for the good of the companies as a whole. What does any of that have to do with shorting Herbalife?
Turning to Page 1, Wapner stalls immediately with uninteresting definitions and descriptions of today's activist investment community. Wapner includes Icahn and Ackman in this category, but their presence exceeds such terminology; it's like saying Magic Johnson is one of the best point guards in the league. This Introduction chapter is titled "Masters of the Universe," a now-stale term coined or popularized by Tom Wolfe 3 decades before Wapner's book.
Chapter 1, called "The Profile," would be entertaining and great satire ... except Wapner actually takes the profile seriously. We learn Herbalife had $100,000 available to pay someone who "never met Ackman before" to "scour the Internet" and put together a profile, of dozens of pages, that gets "deep into Ackman's psyche," a document according to Wapner "so sensitive" that its existence was "a secret until this writing." This document, according to Wapner's book, refers to "Warren Buffet" (spelled with one "t"), an indication you don't always get what you pay for. (If the spelling was actually correct in the report and botched by Wapner — there is no "sic" or indication that this is a misspelling — then that's another problem of a different kind.) This supposedly legitimate report, taken seriously enough by Wapner to dominate his first chapter, suggested Ackman could be appeased or bought off by arranging a photo-op with Jerry Bruckheimer.
By the end of the book, such startling buffoonery is believable because, despite leading a somewhat controversial company, Herbalife CEO Michael Johnson hadn't even considered what would seem like the most basic doomsday plan — a relationship with "whale" investors who could be counted on to defend the stock if someone challenged it. That occurred on its own. Better lucky than good.
(For what it's worth, Wapner also misses a golden opportunity for a teachable moment with the first word in Chapter 1. It is "Herbalife," but he doesn't offer a pronunciation. If you think the pronunciation is obvious, please note that Wapner's CNBC guests will alternate between hard "H" and silent "H" after years of televised reports on this company. At one point in the book, Wapner puts an "an," rather than "a," before "Herbalife.")
The book begins to right itself when readers learn something very interesting about Wall Street — that even supposedly brilliant investors are getting their ideas from salesmen. Here again, Wapner should be lambasting this process, not marveling at it. The notion of shorting HLF stems not from a "eureka" moment for Bill Ackman ... but a run-of-the-mill pitch from a third party called the Indago Group that offered the supposed tip not just to Pershing Square but to "other big name hedge funders on the payroll (sic, it's Indago that's on the payrolls, not the other way around), hoping at least one would bite," which doesn't exactly sound like the strongest bear case. And isn't it curious that the only one who ultimately bites (at least in a big way) is the one who was the subject of a fawning book by the same Indago researcher who wrote that she is "grateful" to Ackman for his "openness and optimism"? (That's called journalistically developing a marketplace.)
In Chapter 3, Wapner hits a stride, detailing how Bill Ackman reached the point where anyone would care whether he was shorting Herbalife. With a little more background oomph, Bite could work as an Ackman biography. But there's not nearly enough research into his coming of age, and Ackman already has a healthy footprint in financial media that some readers may be well aware of. One of the curiosities of this book is that the author seems clearly impressed by Ackman, pointing out how Ackman, "At 6'3", with piercing blue eyes, a barrel chest," was a "straight-A student" who "still seems pissed" about scoring only 750 on the SAT's math portion (one of the numbers that obviously came from Bill himself), but the various Ackman initiatives listed by Wapner feel like, in total, a below-par record as the bungles include not only Herbalife but Target, JCPenney and, worst of all, Valeant. (Ackman, according to the text, had "never heard the name" of Philidor until at least 7 months after he made a $3.3 billion investment in Valeant.) The fact that Ackman is regarded as a famous investor, perhaps even Wall Street titan, despite these flops is reminiscent of a John Cassavetes interview on Dick Cavett's show in which Cassavetes explained that while the actors went without a salary for a long time, if the film "Husbands" lost money, it would be "Columbia's money then."
Ackman's greatest skill would seem to be his ability to attract a large amount of financing at a young age. He likes the comparisons of himself to Warren Buffett, but more relevant might be Donald Trump (not politically), a person of privilege determined to expand the brand by publicizing himself in a field where very, very few want publicity.
It can be inferred from the book that once investors reach the status of Ackman and Icahn, missteps don't really matter; there's forever enough money sloshing around to remain relevant. The truth is that while a hedge fund manager definitely wants to avoid a debacle, the gut feeling, from the book and coverage of this battle in the news media, is that there is no reputational risk to Ackman from the HLF trade. The targeted company had long been viewed with skepticism. He took a shot at it with serious diligence, which some people, but not nearly enough, appreciated. A lot of Ackman's investors can live with that. They might even secretly like the attention Ackman got from this trade. What looks a lot worse is his bizarre, onetime bullishness in VRX.
There's a saying in Hollywood that, if your project makes money, nobody really cares about anything else, and Wolves Bite suggests a similar mentality on Wall Street. After Icahn basically settled his score with Ackman by going long Herbalife, the two purported to reconcile on air, though the mood was something short of real friendship. We learn on Page 208 that if you clash with Bill, you can still end up watching the U.S. Open with him in great seats.
Ackman's initial "skeptical" response to an HLF short in Chapter 2 is the most accurate analysis in the book and about all you need to know about the merits of the idea. He started to warm to the possibility only after 1) a Belgian court ruling and 2) David Einhorn's conference call question (translation: Ackman's team found nothing on its own that justified this trade), in the process devoting time and resources to this possible investment, which only make it more likely that more reasons will be unearthed to make this particular investment. As the saga continues, Ackman's massive presentations and arguments begin to seem much like that nitwit on the recent cable TV special who claimed he had 93 pieces of evidence implicating some California joker as D.B. Cooper.
One of the many red flags about this trade is hinted on Page 81. "Ackman pledged to give all personal profits he made to charity," Wapner writes. If this is such a great investment and totally in the country's best interests, why is Ackman concerned about "blood money" and forgoing the gain from helping out the American people so much? And who exactly would be auditing the trades to ensure "all" of his "personal profits" would go to charity?
More red flags: Upon news of Ackman's HLF position, other investors' knee-jerk reaction was that HLF is more likely a long than short. Robert Chapman, who did not like Ackman and thus like Icahn had a potentially risky motivation, nevertheless correctly "figured the government, which had given Herbalife the once-over before, had 'been there, done that' and had already moved on," Wapner writes. Dan Loeb actually had the savvy to meet the Herbalife CEO before making an investment and hired former FTC lawyers to opine on the likelihood of regulatory action, something that apparently didn't occur to Ackman, who — according to this text — seemed most fascinated by the little shacks that Herbalife distributors apparently operated out of and presumably still do.
Something readers will never know from this book but might notice on CNBC is that, despite his ego and win-at-all-costs approach, Bill Ackman is ... funny. Wapner only states that Ackman has a "quick, unsparing wit." It's more than that. You have to listen to him talk. It's a polite defensiveness. Whether he could do standup is doubtful (he takes himself fairly seriously), but when on CNBC, Ackman entertains. It is a very subtle type of humor, incidental really, the way many people are funny. Sure, most people have no idea what he's talking about. To anyone who has evidence of a brain (not all of us do), Ackman is an interesting, entertaining guy. Probably, if Ackman ever decided that laughs were more valuable than dollars (as if), he could give Jimmy Fallon a run for ratings. No joke.
Carl Icahn is not particularly funny, but in his advancing age, he's no longer the bad guy, the "raider," but something of a likable-uncle persona. He was at his funniest on CNBC referring to Ackman as "Ackman" and insisting (as did Ackman) that he wouldn't let his rival be friends with him or invest with him again. That was rare air. Most of the time, Icahn spends his television soundbites grumbling about corporate governance and over-regulation. What gets him jazzed up every day? Who knows, maybe just righting all the wrongs of improperly run companies.
Though a savvy TV pro, Wapner essentially admits he never thought of trying to put Icahn on air at the same time as Ackman. "Unbeknownst to me," Wapner writes, CNBC producer Maxwell Meyers had independently tipped off Icahn's camp to Ackman's pending on-air call, which apparently was handled by producer John Melloy. Here we have a brief insight into the tenacious profession of television booking in which the competition perhaps is fiercest not among rival channels but among people in the same office. Ackman alone was such a good get, Wapner presumably had no inclination to attempt anything bigger that might derail it. Yet after the famous Icahn-Ackman showdown, Icahn became a semi-regular guest on Wapner's program, to the loss of other CNBC programs.
Wapner in the book never mentions that during the on-air showdown, Icahn was more irritated with Wapner than he was with Ackman and told the CNBC host, after several questions about a then-undisclosed HLF stake, this would be their last interview together (that quickly proved not to be the case). Icahn told Wapner, "I didn't get on to be bullied by you ... I don't give a damn what you want to know ... you can say what the hell you want ... I'll talk about Herbalife when I goddamn want to and not when you ask me. I'm never goin' on a show with you again, that's for damn sure, OK." He also told Wapner: "I don't think you've been handling this fairly. I think you're trying to attack me and, and bully me into admitting something. ... You seem like a nice enough guy ... You're giving me all this bullsh--; and Max Meyers said I could say what I wanted on the show so I'm saying it."
The strength of Wapner's book is the biographical material on Ackman. On Icahn, he has little. On Michael Johnson, he's somewhere in between. It feels like everything Wapner got from Johnson was run by Johnson through HLF lawyers or PR teams first. In compiling bios, Wapner is oblivious to significant others. Surely individuals such as Ackman, Icahn and Johnson go home at night and ask a spouse/significant other, "What do you think? Am I going to lose a lot of money here?"
When in doubt, Wapner accepts Ackman's stated thoughts, including on Page 201: "As for Ackman, he remained convinced the new restrictions would ultimately cause the company to crumble, even feeling vindicated by how tough the FTC's language was." Seriously? Wapner believes that Ackman was really "convinced" of this? It's hard to believe Wapner doesn't find Ackman's last-ditch letters to the FTC pathetic. How about when Ackman claims well into his HLF debacle that in his career, he has not seen a "less attractive risk-reward ratio than a long investment in Herbalife."
Hilariously, despite the fact MBIA is regarded as Ackman's signature success, Wapner in Chapter 2 writes of "the toll that the whole affair had taken on him personally" ... what sort of toll is making a lot of money and acquiring a reputation that, from subsequent endeavors, seems overrated?
Wapner's text is peppered with overwriting. For example, "... who made an appointment to visit him face-to-face the next time she was in the city" (would she visit him in any manner besides face-to-face?). On Page 82, see how easy it is to scratch a few words, "With his company's stock in free fall, Johnson, who'd never before been through such an exercise in his professional career, picked up the phone and called his mentor, Jerry Perenchio …"
Or here: "Now — finally — for the very first time, Johnson and Herbalife's other executives felt they could begin to understand why the war had happened in the first place."
Wapner also belabors facts as though readers had already forgotten the previous chapters. On Page 59, he writes that "Herb Greenberg, who covered Herbalife as a reporter for CNBC and hosted a network documentary about the company ..." Then on Page 81, Wapner reaffirms for those who might've forgotten, "Herb Greenberg, who'd also done work on Herbalife for a documentary project produced by the network …" (He doesn't mention though if Herb was named after Herbalife.) (That was a joke.)
Twice we're told Hoffman is "the PR man."
On Page 95, this sentence somehow made it through: "On July 17, 2012, Yahoo named Google star, thirty-seven-year old Marissa Mayer, CEO."
On Page 173, we have, "according to experts who opined on the topic" (obviously they are opining on the topic or their information wouldn't be in the book), and on Page 188, "By December, Apple had spent the most of any company in the S&P 500 on the move, according to FactSet, which tracks such data." (If they didn't track such data, he probably wouldn't be citing it.)
On Page 149, we learn Ackman attended the Robin Hood Investment Conference, and that "Ackman branded Herbalife 'Robin Hood in Reverse' in a play off the title of the well-attended charity event." (It's not hard to tell that it's a play on the conference name.)
In a fairly short book, there are grammar glitches. On Page 112, there is "poured through Herbalife's financial statements," and on Page 140, "Herbalife shares, which Ackman had blasted into the $20s toward the end of 2012, was now up more than 80 percent for the year," and on Page 212, "has millions of loyalists around the global."
Fairly regularly, Wapner notes the price of Herbalife shares while certain events are happening. Up, down, sideways, inside out, this is a mess.
Inexplicably, the one time numbers are really needed — the price of Herbalife shares on Dec. 19, 2012, the day before Ackman's big Sohn presentation — Wapner doesn't bother; on Page 81, all he says is that the shares fell 12% and then 10% the day of presentation.
Even though the whole book is about a famous short, it's not until Chapter 6 that Wapner defines the goal of short selling: "If the shares lose value, you can them buy them back." In Chapter 2, he notes that a short is a bet that "shares would plummet."
Chapter 7, in which Wapner decides to recount Dan Loeb's battles with Yahoo, is downright terrible, the worst of the book.
Mainstream-media reviews of When the Wolves Bite are virtually nonexistent. The book got off to a healthy start on Amazon presumably because of Wapner's relentless on-air promotions on CNBC that began a couple months before the book was even available.
As the HLF war dragged in recent years, presumably, Wapner sought to get a book out before the episode faded from public consciousness. Somehow, it concludes with the battle still in progress, even though Ackman acknowledged (February 2018) that he was out of his HLF short. Wapner writes in closing, "How many pitch drafts did we go through?" One wonders if any included the term "plutocracy." The book is 100% clear on one thing: How far the government will go for the highest bidder. The astonishment of Bite is not Ackman's silly trade but how far he got with it. Four years after Wall Street needed tens of billions in taxpayer bailouts to stay afloat, a rich guy was basically commanding the government to go to work for him, and it did.
When the Wolves Bite — Two Billionaires, One Company, and an Epic Wall Street Battle" (2018)