In a statement on Wednesday, Ackman said, "The goal of our December 20 presentation 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. To the extent another investor, long or short, brings additional sunlight to the situation, we welcome them."
Loeb called Ackman's short thesis "preposterous."
In a letter to investors obtained by the New York Times' Dealbook, he said "the short thesis rests on the notion that the FTC has been asleep at the switch, missed a massive fraud for over three decades, and will shortly awaken (at the behest of hedge fund short seller) to shut down the company. We find this thesis to be preposterous, particularly since the FTC has been sensitive to frauds of this kind," the statement read.
In laying out his bull case, Loeb said "the shares could be worth $55 to $68, offering 40 to 70 percent upside and making the company a compelling long investment for Third point."
The Securities and Exchange Commission enforcement division has opened a probe into Herbalife, according to a Dow Jones report Wednesday afternoon. (Read More: Why Spotting a Pyramid Scheme Isn't So Easy)
Herbalife shares fell sharply after Ackman revealed his short position in December, but have risen in the last week. Herbalife's stock rose sharply before the announcement, and again on the news.
Dan Loeb's Third Point was a clear hedge fund standout in a horrible 2012 for the industry as almost nine out of 10 managers underperformed the S&P 500.
Loeb used an activist position in Yahoo and the contrarian buying of Greek bonds to drive the firm's flagship fund to a 21 percent gain last year. The firm's more-leveraged Ultra fund posted an even bigger 34 percent return.
Ackman is admired for some outstanding trades, including his investment in General Growth, which saw a $60 million investment rise to $2.3 billion.
But for all his public successes, he also has had some misses. His recent bet on JC Penney has so far been a losing one. He also unsuccessfully went after Target.