Herbalife (HLF)

[lonewolf]

I must admit that I never heard about this company nor its products before but I happened to turn into CNBC early this morning when the 'Clash of the Titans' segment between Carl Icahn and Bill Ackman was telecast.

It was the most fascinating 15-20 mins of financial live TV I ever watched.

Not knowing much of the background, I slowly figured that Bill Ackman made a very public 3-hr presentation on Herbalife and why he felt the company was operating a pyramid scheme and basically worthless. As such his company has taken a short position on the company.

Sound a lot like Muddywater vs Olam, doesn't it? Except in this case, you have someone who dun like Ackman in Icahn and there are speculation that he has taken an opposite position on Herbalife just because he dun like Ackman.

Is Bill Ackman right? Judge for yourself. His epic 300+ presentation that took a yr to research is available online. I think he raised many fascinating points which are instructional to value investors.

Who Wants to be a Millionaire?

One more thing, Herbalife apparently has a web presence in Singapore if you google for it. I wonder if there are any Herbalife Independent Distributor in Singapore.

[specuvestor]

Dan Loeb of third point is taking a maasive 8% stake opposite position to Ackman, who is also long HKD options. The irony is Ackman did his trade after Einhorn was found on the conference call in Herbalife but Einhorn doesn't seem to have shorted it significantly. 

I have a feeling HKD and Herbalife will be Ackman downfall because he too big mouth about it

[rogerwilco]

imho while Dan Loeb is long Herbalife, he hedges his position by short another MLM firm

significant or not, Einhorn has profited from his short position against Herbalife

We shall see how Ackman vs Herbalife turns out, in the past he has shown his persistence in fighting a long, protracted war

See more Ackman herbalife short thesis in factsaboutherbalife.com

[specuvestor]

Valid points and Ackman is definitely well known in the industry that unlike others, he is no one hit wonder. But for completeness also see third point newsletter.
http://www.scribd.com/doc/119675166/thir...ter-010913

Einhorn nevertheless is out, whether small or not, while Ackman is not when the former was his "catalyst"; and icahn doesn't sound credible. But fundamental to all this is that contrary to perception, MLM is as legit as Olam's bio asset reval. Pyramids and false accounting are not. See my posts in Olam. End of the day time is friend of the wonderful company, enemy of the mediocre. So we'll see.

[HitandRun]

John Hempton

Another view by John Hempton of Bronte Capital, a boutique fund manager.

[rogerwilco]

For those who are interested, I tried to document various posts regarding Ackman vs Herbalife in this valuebuddies thread
Bill Ackman vs HerbaLife

hopefully one day when the dust settles down, we can use it as source of learning...:-)

[specuvestor]

As discussed... Ackman too big mouth this time round... I think his HKD options will also expire worthless

+------------------------------------------------------------------------------+

Icahn Serious on Squeezing Ackman Builds Holding in Herbalife
2013-02-15 01:53:04.44 GMT


By Duane D. Stanford and Miles Weiss
Feb. 14 (Bloomberg) -- It turns out billionaire investor
Carl Icahn really is bullish on Herbalife Ltd. and serious about
squeezing rival hedge-fund manager Bill Ackman.
Icahn, 76, reported a 13 percent stake in Herbalife today
and said he would seek talks with the nutritional supplements
company, sending the shares up as much as 25 percent in after-
hours trading. Strategic alternatives for Herbalife may include
taking it private, he said in a filing with the U.S. Securities
and Exchange Commission.
Today’s disclosure comes almost two months after Ackman
said he had sold short 20 million shares of Herbalife and
alleged it was a pyramid scheme. Icahn followed by saying last
month that Ackman, 46, acted inappropriately when publicly
announcing his bet against Herbalife, reviving a decade-old feud
with the founder of Pershing Square Capital Management LP.
Ackman’s wager had already pitted him against Daniel Loeb
in a rare public dispute among hedge-fund managers over whether
Herbalife is a legitimate enterprise or a fraud.
“Carl Icahn just delivered Bill Ackman a Valentine he’ll
never forget,” hedge fund manager Robert Chapman of Chapman
Capital LLC said in an e-mail today. Chapman Capital holds a
long position in Herbalife.
Herbalife has repeatedly denied Ackman’s accusation that it
is a pyramid scheme.

[specuvestor]

A lesson to learn from one of the most glaring mistake this year

+------------------------------------------------------------------------------+

Herbalife Clean Audit Another Setback for Ackman’s Pyramid Case
2013-12-17 05:01:00.12 GMT


By Duane D. Stanford
Dec. 17 (Bloomberg) -- Hedge fund manager Bill Ackman,
who’s already lost as much as $500 million betting against
Herbalife Ltd., suffered another setback after the company he
accused of being a pyramid scheme said a re-audit found no
material changes.
Herbalife, a maker of vitamins and meal-replacement shakes,
soared after it said PricewaterhouseCoopers LLP completed a
review of the fiscal years ended Dec. 31 in 2010, 2011 and 2012
and the company is now up to date on its filings with the U.S.
Securities and Exchange Commission, according to a statement
yesterday.
Ackman, whose Pershing Square Capital Management LP
initially sold short at least 20 million Herbalife shares, has
lost money on the bet as the stock more than doubled this year
and investors, including billionaire Carl Icahn, have backed
Herbalife. The company has consistently denied Ackman’s claims.
“We are very happy, but I don’t think it was unexpected,”
Icahn said yesterday in an interview about the results of the
audit. “It is a good company, it is still undervalued, it’s a
growth company which gives work to a lot of people and what
Ackman says is nonsense.”
The shares rose 9.4 percent to $74.83 yesterday in New
York, the biggest one-day gain since May 20.
“It is not the role of Herbalife’s auditor to determine if
the company is a pyramid scheme,” Pershing Square said in a
statement yesterday. “Rather, that determination depends on
whether distributors earn more from recruiting new distributors
than from retail sales to consumers who are not distributors.”

December Deadline

“Remember, Enron also had audited financial statements,”
Ackman also said in an e-mail. Herbalife declined to respond to
an e-mail seeking comment on the Enron statement.
Ackman said in November that the company was taking too
long to produce the re-audits, adding that a failure to meet a
self-imposed December deadline would make it hard to borrow
money. In August, Ackman sent a 52-page letter urging the
auditor to pay attention to “serious accounting and disclosure
issues.”
“He couldn’t be any further from the truth,” Chief
Financial Officer John DeSimone said yesterday in a telephone
interview, referring to Ackman. “His thesis is wrong, his facts
are wrong. It’s now a propaganda campaign.”
The nutrition company hired PricewaterhouseCoopers in May
after its previous accounting firm, KPMG LLP, resigned because
of alleged insider trading by an auditor.

Buyback Plan

Herbalife executives said in October they would evaluate a
2014 share repurchase plan once the re-audits were completed and
more options were available. They also left open the possibility
of a capital restructuring, such as a tender offer. A decision
hasn’t been made, DeSimone said yesterday.
Icahn, who bought Herbalife shares after Ackman made his
accusations, is the company’s largest individual investor, with
a 16.8 percent stake, according to data compiled by Bloomberg.
Earlier this month, Grand Cayman-based Herbalife won a
Belgian appeals court ruling rejecting claims the company is a
pyramid scheme, and concluding that income its distributors earn
from others recruited to buy or sell its products isn’t a
violation of European consumer protection laws.
In September, Bill Stiritz, chief executive officer of
Raisin Bran maker Post Holdings Inc., said he had bought
Herbalife shares and was researching the company. He is now
Herbalife’s fourth-largest shareholder with a 6.4 percent stake.
Stiritz has said he’s willing to take part in a leveraged buyout
of the company.
Herbalife sells vitamins, shake mixes and skin gels through
a marketing network of independent distributors in at least 81
countries. Those independent contractors earn revenue by selling
products directly to customers and recruiting new distributors,
for which they earn a share of those sales and incentives from
the company. In October, Herbalife posted third-quarter profit
that beat analysts’ estimates as sales gained in the Americas.

For Related News and Information:
Einhorn Damage Control at Herbalife With Nutrition Clubs: Retail
NSN M5FFVP6KLVR5 <GO>
Herbalife Seeks Fresh Image as It Fends Off Hedge-Fund Critics
NSN MN8D1J1A1I4H <GO>
Ackman Herbalife Short Selling Started With Friendly Tip: Retail
NSN MG8LUB6K50Y4 <GO>
Income Statement Summary: HLF US <Equity> CH2 Q <GO>
Top Consumer News: TOP con <GO>

--With assistance from Serena Saitto in New York. Editors: James
Callan, Stephen West

To contact the reporter on this story:
Duane D. Stanford in Atlanta at +1-404-507-1307 or
dstanford2@bloomberg.net

To contact the editor responsible for this story:
Robin Ajello at +1-212-617-7261 or
rajello@bloomberg.net

[Boon]

China's Nu Skin probe may help Ackman's Herbalife bet

By Svea Herbst-Bayliss
BOSTON Thu Jan 16, 2014


Jan 16 (Reuters) - Herbalife Ltd shares tumbled nearly 10 percent on Thursday as investors grew concerned about the possible fallout from a regulatory probe in China into Nu Skin, which has a similar business model to the nutrition and weight loss company.

The development could benefit billionaire investor William Ackman, who has placed a $1 billion bet that Herbalife's stock price will eventually fall to zero under regulatory scrutiny for what he has called a pyramid scheme. Operators of pyramid schemes typically try to make money by recruiting new members, who pay fees, rather than relying only on the sale of goods.

Herbalife has vehemently denied Ackman's claim that it's operating a pyramid scheme.

Chinese officials said on Thursday that they are investigating whether Nu Skin Enterprises is operating an illegal pyramid scheme after a Communist Party newspaper, the People's Daily, said that the U.S.-based company was using sales tactics "akin to brainwashing." Nu Skin, which makes anti-aging skin-care and nutritional products, said in a statement on Thursday that "we are aware that Chinese regulators have now initiated investigations to review issues raised by recent news reports." Nu Skin's stock plummeted 26.4 percent on Thursday to close at $84.80 on the New York Stock Exchange.

For some investors and academics, the Nu Skin scrutiny raised the chances that Chinese regulators might soon broaden their probe to look into Herbalife, whose global operations include China.

"The business models of these two companies, Nu Skin and Herbalife, are absolutely similar," said William Keep, dean of the School of Business at the College of New Jersey, who has written extensively on multi-level marketing. "And it would not be a large leap for Chinese officials to make that they should also look at investigating Herbalife."
Keep said he had received numerous inquiries from Wall Street investors about what constitutes a pyramid scheme since Ackman placed his $1 billion short bet against Herbalife in 2012. Big-name investors, including Carl Icahn and George Soros, have taken stakes in Herbalife, lining up against Ackman.

Icahn did not return a call on Thursday.

A spokeswoman for Ackman declined to comment.

Herbalife spokeswoman Barbara Henderson did not comment on whether the company expects a Chinese inquiry, but said in an email: "We are confident in our consumption-based business model in China."

Still investors were clearly concerned as Herbalife's stock slid 9.8 percent to close at $71.63 on Thursday. The stock has tumbled 8.98 percent for the year so far, after a surge of 138.92 percent in 2013.

For Ackman and investors in his $12 billion Pershing Square Capital Management, the probe into Nu Skin might represent a glimmer of hope that his short position, which has lost as much as $500 million, might still pay off.

In December, Ackman said that he would soon share publicly details of his own investigation that he had already given to U.S. regulators that Herbalife was probably violating multi-level marketing restrictions in China.. In his year-long campaign against Herbalife, he approached the Securities and Exchange Commission, the Federal Trade Commission and various state regulators with information that he believes will support his claim that Herbalife is running a pyramid scheme in the United States.

Regulators have declined comment.

Keep said he also approached the FTC last summer, urging the agency to investigate pyramid schemes and pointing out that both Herbalife and Nu Skin may overstate the financial opportunities they promise their distributors.

An audit of Herbalife's books released in December showed no material changes to its financial statements.

http://www.reuters.com/article/2014/01/1...H320140117

[specuvestor]

Not only is he big mouth he is now classic fall-in-love-with-trade syndrome. I'm surprised that his HKD position is not listed as one of the major losers

BFW 02/20 20:21 *PERSHING SAYS HERBALIFE SHORT BIGGEST LOSER SINCE FIRM STARTED
BN 02/20 20:20 *PERSHING SQUARE DETAILS BIGGEST WINNERS, LOSERS IN PRESENTATION
BN 02/20 20:20 *PERSHING SAYS HERBALIFE SHORT BIGGEST LOSER SINCE FIRM STARTED


+------------------------------------------------------------------------------+

Pershing Says Herbalife Biggest Loser Since Firm’s Inception (1)
2014-02-20 21:31:26.592 GMT


(Updates with biggest winners in third paragraph.)

By Kelly Bit
Feb. 20 (Bloomberg) -- Pershing Square Capital Management
LP’s bet against the shares of Herbalife Ltd. has become the
biggest loser for the activist investment firm since its
inception in 2004 with a loss of 49 percent, according to a
presentation obtained by Bloomberg News.
Pershing said J.C. Penney Co. and Citigroup Inc. are the
next-worst wagers, according to the Feb. 13 presentation by the
$12 billion hedge-fund firm. Bill Ackman, founder of New York-
based Pershing, has spent more than a year saying Herbalife, a
marketer of vitamins and weight-loss shakes, is a pyramid
scheme.
Ackman outlined his biggest winners and losers after the
firm rose 9.7 percent in 2013 in its oldest fund, Pershing
Square LP and posted an annualized return of 19 percent since
inception. His best-performing bets are General Growth
Properties Inc., Canadian Pacific Railway Ltd. and Fortune
Brands Home & Security Inc., according to the presentation.
“Since inception, substantially all of our profits have
come from investments in large cap,” the firm said in the
presentation. “Large cap shareholder activism is one of the few
strategies where scale is an advantage.”
Ackman, 47, sold short the stock of Herbalife in 2012 in a
$1 billion wager that the company’s value would plummet. He said
in a November interview on Bloomberg Television that he “will
take this to the end of the earth.” The presentation notes that
Herbalife has lost 15 percent this year, after gaining about 145
percent in 2013, including reinvestment dividends.
Fran McGill, a spokesman for Pershing Square with
Rubenstein Associates, declined to comment on the presentation.