John Hempton of Bronte Capital has good news for you.
Hempton, an avowed Herbalife bull, is sceptical about whether any inventory loading happened at the company. When a firm requires its distributors to buy lots of inventory, it’s one sign of a pyramid scheme, which grows by recruiting distributors instead of actually selling products. Hempton says there probably wasn’t inventory loading because the company refunds distributors for unsold products.
A look at Herbalife’s website shows that they did offer refunds as of 2014, with one caveat found in a footnote of its pitchbook: “If requested within 90 days for the return of the HMP [Note: That's the Herbalife Member Pack, a starter pack] and one year for the return of resalable inventory, upon leaving the business.” That’s a conditional refund, to be sure.
Still, Hempton has been hunting for the telltale distributors with tons of unsold Herbalife shakes in his or her basement, and has had trouble — but for one grim exception. Read more
Bill Ackman there, on most Americans’ perception of short selling. His comments are part of a wide ranging interview in the new issue of Graham and Doddsville, the investment letter put out by students at the Columbia Business School which has a strong value investor heritage.
Also of interest, a few years ago Bill took a long hard look at McGraw-Hill Financial, the publishing group which owns Standard & Poor’s, but passed.
Ultimately, we couldn’t get comfortable with the potential liability associated with being in the bond rating business.
The current share price of $49, down more than a third so far this year, is not one of those big numbers for Herbaflie. However John Hempton, has spotted some numbers that he thinks could make a difference.
The manager of Bronte Capital, one of the most prominent bulls on the stock, has outlined the number of meals he thinks Herbalife sells in a year. From that he has extrapolated the number of customers it needs to eat them. Hey presto, it is far too many for the pyramid scheme allegation to stick, he argues.
There may be something to it, but it would be a surprise revelation at this stage of the debate, and a few assumptions demand some closer interrogation first. Read more
Bill Ackman, who will be making a new Herbalife presentation on Tuesday at 10am EST in New York, has given CNBC a small taste in advance. Well, by taste we mean he predicts ithe company’s rapid and imminent exposure as a fraud.
Valeant Pharmaceuticals To Hold Conference Call On Tuesday, June 17, 2014 To Correct Recent Misrepresentations
LAVAL, Quebec, June 13, 2014 /PRNewswire/ — Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) today announced that it will conduct a fact-based presentation to refute recent misleading assertions made by Allergan, Inc. (NYSE: AGN) and others, as well as answer additional investor questions, on June 17, 2014.
Bill Ackman, founder and showman in chief of Pershing Square is adding a new string to his bow on Monday morning as co-host of CNBC’s squawk box for an hour. He’s joined by Michael Porter, professor at the Harvard business School, to discuss the mooted deal where he has teamed up with Valeant to purchase Allergan and the changing structure of the pharmaceutical industry.
The two have been a CNBC double act before, but it seems a good a time as any to dust off the stale sell case against Valeant that is still floating around. In short, it is a company that only makes a profit after a lot of accounting adjustments.
In case you were wondering, this has been a painful one to be short for most of the last year or so. Read more
The US Court of Appeals in San Francisco on Monday upheld a district court ruling that BurnLounge was a pyramid scheme. A closely watched case — the first appeal court judgement on pyramid law in almost two decades — the judgement affirmed the existing case law and paves the way for the Federal Trade Commission to clarify the way it interprets that law.
However, the court didn’t need to answer one of the most contentious legal questions to resolve the case, so it didn’t. It also said that there is no basis in the case law to assume a simple definition of what constitutes a customer, a blow for those in favour of a clear cut pyramid rule that leaves room to argue the status quo is fine.
So, the ruling can be seen as positive for Herbalife (which has claimed validation), even if it is far from conclusive. What it emphasises is that proving a pyramid case remains fact specific, where legitimacy turns on the structure of a multi-level compensation plan and the motivations of those involved. The FTC investigation into Herbalife, which rumbles on with the company’s co-operation, remains the best chance of resolving whether widespread industry practices are legitimate. Read more
That’s Herbalife President Des Walsh, telling ABC News that he is appalled at the behaviour of distributors who were captured on hidden cameras making bold claims for the health benefits of his company’s products (like curing brain cancer, for instance).
He was interviewed as part of an investigation by ABC, including an interview with a whistleblower who didn’t disclose at the time that Bill Ackman had agreed to pay up to $3.6m in bespoke unemployment insurance.
Which has prompted Herbalife to get a bit of retaliation in at the short seller behind Pershing Square, asking:Read more
Carl Icahn, the largest shareholder in Herbalife with a 16.8 per cent stake, will soon have five seats around the boardroom table, according to the company:
Herbalife will nominate three designees of the Icahn Parties, Hunter C. Gary, Jesse A. Lynn and James L. Nelson, for election to Herbalife’s board of directors at its 2014 Annual General Meeting of Shareholders, currently scheduled for April 29, 2014 (“the Annual Meeting”).
Messrs. Gary and Lynn are employees of Icahn Enterprises L.P., and will be nominated for election to the Class I directorships currently held by Carole Black and Michael Levitt, whose three-year terms end at the Annual Meeting.
The latest dossier from Pershing Square has landed, and this time the Herbalife short campaign would like to draw your attention to a Dallas-based marketer of the nutritional-shake business opportunity.
Dan Waldron is a 30 year Herbalife veteran. He is affiliated with several businesses that have ties to Herbalife and has the broad smile of a self-made man when he poses for photographs with Michael Johnson and Des Walsh, chief executive and president of the multi-level marketing group.
More on Mr Waldron in a moment, but we thought it might be useful to explain where Pershing are going with all this. In addition to the lobbying battle, Bill Ackman and co are attempting to show a pattern of bad behaviour by senior members of the Herbalife hierarchy that might interest the US authorities. Read more
So Bill Ackman gave it one more concerted public shot. After spending a year of his life and half a billion or so of Pershing Square dollars shorting Herbalife, he might take a lower profile from now on.
Herbalife, meanwhile, has tried to turn the tables on the hedge fund, going active on the activist investor’s investors, according to Bloomberg. And a Belgian appeals court has reversed an early ruling that the company was pyramidical. So, victory to the bulls?
Not just yet. For a start, not everyone has got the message that Herbalife absolutely, positively, is not a pyramid scheme. Read more
This could be a four word post – Bill Ackman is wrong – but for reasons that we’ll explain here and in the next post, the future for the Herbalife share price is now subject to questions about the multi-level marketing industry as a whole.
What we want to do then, is share some of the reasons that we’ve heard for why people have bought the stock of a company that the Pershing Square activist has said is going to zero, and we think still has some serious questions to answer about its business model. Read more
Real life actual judicial opinion on Herbalife arrives from California. Click for the full document
It is only denial of a Herbalife motion to dismiss a suit from a former salesman, Dana Bostick, but there are some significant judicial thoughts that add useful perspective on what we have been reporting about the pyramid scheme case law as it applies to Herbalife. Read more
There is something weird about the way that Herbalife has been responding to questions about its customer base.
Faced with a barrage of scrutiny over the claims from Bill Ackman that it is a pyramid scheme, and as Herbalife has insisted that it is legitimate, it has turned to market research companies to show that it has plenty of real customers. Read more
Herbalife was having another good day in the market at pixel time.
If that picture could be conveyed aurally, that first plunge in 2012 would be the sound of analyst jaws dropping as David Einhorn appeared on the Herbalife conference call to ask three innocentquestions… Read more
There have been several letters this year to the FTC urging it to investigate claims that Herbalife is a dastardly pryamid scheme, from consumer groups, congress people and others. Most have leant on the arguments made by short seller Bill Ackman, but today’s from MANA, a National Latina Organisation, has some of the strongest and most specific language we have seen.
Herbalife claims it is both a product company and a business opportunity, but clearly this is a deceptive claim since the majority of Herbalife distributors make little or no income. According to Herbalife’s own 2012 data, 88 percent of their participants received no payments from the company at all.
Much excitement on Wednesday on alleged news (via CNBC) that George Soros has taken a big stake in the much discussed food supplement business Herbalife. Here’s the auto-update chart on Wednesday. At pixel the price was up 7.9 per cent at $64.70.