01/22/2013 03:45 pm ET Updated Mar 24, 2013

Much Ado About Herbalife

So here we have Carl Icahn joining the battle between William Ackman and Dan Loeb over Herbalife -- or so it seems.

In early January, when Loeb revealed an 8.2 percent long position -- apparently at loggerheads with Ackman's $1 billion short bet that the company is a pyramid scheme whose stock will go to zero -- pundits billed the situation a "Battle of Titans."

Much was made of Loeb's comments that "we find this [the short] thesis to be preposterous, particularly since the FTC has been sensitive to frauds of this kind." He then went on to say that if the company bought back shares, its stock could go to $55-$68. Icahn, for his part, hasn't amplified on his views beyond announcing that he has taken a "small" long position as well.

So is Ackman wrong? That may well not be the point.

When Loeb made his investment he was basically looking at a company with a 97 million share float and a short interest of 26 million shares even before Ackman began shorting another 20 or so million shares.

So here was a stock that had dropped from the mid $40s to the high $20s -- a 40 percent move down -- even as its nominal float of shares actually available for trading (rather than sidelined in short positions) had dropped 28 percent, pushing total short interest to almost half the shares outstanding. Would you not expect the stock to gradually move upward from there?

And so it did. Between Ackman's late December presentation and Third Point Capital's early January 13G filing, the weighted average of the open, high, low and close of Herbalife stock has ranged between $31.07 and $33.70 on volume in excess of 178 million shares. This means Dan Loeb's Third Point Capital has already achieved a 30 to 40 percent return as of yesterday's close. Goes to show what sagacity (and good nerves) can do for you, long thesis or not.

Short-squeeze play on the horizon? Perhaps, but that would just be icing on the cake.

Paradoxically, the quicker the stock moves up the more likely Ackman's trade could pan out. After all, did Loeb not allude to the discount in the stock being "probably for a limited time only?" So when he and a few other longs begin exiting...