Traders are piling into Bill Ackman's favorite short bet

Hedge fund manager Bill Ackman, the outspoken critic of Herbalife who publicly bet $1 billion against the company, took his fair share of lumps as the stock price failed to cooperate.

Now that Herbalife's shares have started to weaken, finally allowing the Pershing Square Capital Management founder to make back some money on the wager, he finds himself with plenty of company.

Short interest on Herbalife sits at $1.8 billion - up $635 million, or 55%, for the year, according to data compiled by financial analytics firm S3 Partners. The measure is approaching a historical high of $2 billion set in July 2013.

Those short positions have yielded $106 million in mark-to-market profit in the last two days alone as the stock has slipped 5.7%. Two-thirds of that belongs to Ackman, S3 says.

So why did Herbalife's stock price start cooperating with Ackman's bearish view? On Monday, the company trimmed its full-year forecast, saying that revenue would grow just 0.5% to 3.5% in 2017, down from an estimate of 6% in May. It also foresees a year-over-year sales decline of as much as 6% in the second quarter.

The adjustments are a direct result of last year's settlement with the Federal Trade Commission, which made Herbalife change its business model and pay $200 million for distributor refunds.

The subsequent share weakness is a result that Ackman has struggled to will into existence since he first called Herbalife a pyramid scheme in a scathing research report in December 2012. He doubled down in July 2014, giving a widely-publicized presentation arguing why Herbalife should go to zero.

But as Ackman found out the hard way during the period since his first public rebuke of Herbalife, the company's shares are surprisingly resilient, making it a risky short bet.

Herbalife surged 124% from the start of 2013 through last Friday, experiencing periods of strength that undoubtedly squeezed short positions and caused pain for Herbalife bears. To add insult to injury for Ackman specifically, the stock rallied 15% during his ill-fated 2014 slideshow.

But with Herbalife's newly-tempered forward guidance, the tide may be shifting into his favor - as long as traders don't cover their bearish wagers, as they have the last two times short interest was this high. S3 thinks it could be different this time around.

"With HLF's management revising forward looking revenue guidance lower, shorts may stay in their positions longer in order to see the impact of continued FTC compliance," Ihor Dusaniwsky, head of research at S3, wrote in a client note.