Daniel Loeb is squaring off against Bill Ackman over the future of Herbalife Ltd.

By taking an 8.2 percent stake in the direct seller of nutrition shakes, Loeb’s Third Point LLC is the latest firm to reject hedge fund manager Ackman’s theory that Herbalife is a pyramid scheme. Loeb joined the fray Wednesday as the company prepared for an investor conference in New York on Thursday, where it has vowed to come out punching.

Third Point, which had about $10 billion under management as of Dec. 31, bought 8.9 million Herbalife shares, according to a filing with the U.S. Securities and Exchange Commission.

“All multi-level marketers by definition operate under a so-called ‘pyramid’ structure and have some internal consumption, facts which do not render them patently illegal,” Loeb’s Third Point said in a note to clients.

Pershing Square Capital Management LP founder Ackman said Dec. 20 that Herbalife uses inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme.

In its client letter, Third Point said it started acquiring Herbalife “mostly during the panicked selling that followed the short seller’s dramatic claims.”

Loeb’s investment “sounds incredibly wise to us,” Tim Ramey, an analyst with D.A. Davidson & Co., said while traveling in New York, where he plans to attend the Herbalife meeting. “The Ackman case doesn’t have any merit. It attempts to prove the company’s a pyramid scheme when the prima facie evidence is that it’s not.”

Ramey recommends buying the stock.

Short Position

Herbalife rose 4.2 percent to $39.95 yesterday in New York. The shares have declined 6 percent since Dec. 18, the day before Ackman disclosed his short position.

Barb Henderson, an Herbalife spokeswoman, declined to comment on the Third Point investment. Loeb didn’t immediately respond to an e-mail seeking details.

Ackman, who has sold short about 20 million Herbalife shares, said in a statement that his goal was “to shine a spotlight on the company so that the world better understands the facts about Herbalife.”

“The outcome of this investment is not about Pershing Square or anyone else who is long or short the stock,” Ackman, Pershing Square’s chief executive officer, said in the e-mailed statement. “To the extent another investor, long or short, brings additional sunlight to the situation, we welcome them.”

Short selling refers to the practice of borrowing shares and selling them, with the goal of profiting by repurchasing them later at a lower price.

SEC Inquiry

The U.S. Securities and Exchange Commission has opened an inquiry into Herbalife, Dow Jones reported Wednesday, citing a person close to the probe.

The inquiry won’t necessarily result in an enforcement action, the news service said. John Nester, a spokesman for the regulator, declined to comment about Herbalife or the report to Bloomberg News.

Loeb, like Ackman, is an activist investor who buys stakes in companies and then advocates for changes to boost a their value. Early last year, Loeb pushed for an overhaul of Yahoo! Inc. after saying the Web portal was mismanaged. The internet company revamped its board and in May said Chief Executive Officer Scott Thompson had stepped down after failing to correct errors in his credentials.

Murphy Oil Corp. said in October it planned to spin off its U.S. refined fuels business, including a network of gasoline stations at Wal-Mart Stores Inc. locations, after Third Point said the company should divest assets.

Loeb joins fellow hedge fund manager Robert Chapman of Chapman Capital LLC in going long on Herbalife. Ackman’s move prompted Chapman to make a “monster long bet” on Herbalife, he said in a blog post. Complaints against the company are few, he also said.

John Hempton, chief investment officer of Bronte Capital, disagrees with Ackman’s argument that regulators will eventually step in, he wrote on his fund’s website. Hempton has reported many frauds to regulators, who rarely acted, he said.