Pershing Square published an exhaustive list of questions again challenging Herbalife’s business model. Bill Ackman’s hedge fund issued a 40 page document, in which it asked Herbalife hundreds of questions, and even reminded the firm that ‘they aren’t the girl scouts.’ Ackman will be presenting new information/questions regarding Herbalife on February 13th, which we will be covering live.

Analysts at Wedbush who have a buy on Herbalife issued a research report, which defends Herbalife Ltd. (NYSE:HLF), but notes that Ackman did raise some key questions.

Wedbush states that the questions raised by Ackman “is largely a rehash of prior arguments though.”

Pershing Square, whose founder Bill Ackman noted that he has a more than a 20 million share short position in shares of Herbalife Ltd. (NYSE:HLF), launched a second salvo, following the late-Dec. initial presentation of their short idea. Mr. Ackman published a list of questions, again challenging the legality of Herbalife’s core multilevel marketing (MLM) business model.

The primary gist of their argument remains the same, questioning the degree to which Herbalife distributors derive financial rewards from recruiting new representatives vs. commissions from selling product. Wedbush’s view remains that Herbalife’s business model is “a legal MLM whereby retail profits from product sales exceed what Pershing Square would describe as “Recruiting Rewards”.

Upon the analysts’ initial reading, they saw no substantive evidence or challenge in this new list of questions from Pershing Square that would change their view. However, they view the tone of many of these questions as simply asking for levels of disclosure or detail that no publicly-traded MLM companies provide (i.e. “please provide Net Sales by country for each of the last ten years for each country in which Herbalife products are or have been offered”).

Wedbush does agree with Ackman on one issue. They believe he raises a new issue questioning lack of regulatory oversight of Nutrition Clubs. They note that “this new publication from Pershing Square, however, did raise some interesting questions on one topic not addressed in detail before, namely whether Herbalife’s Nutrition Clubs, a powerful marketing strategy which has been the primary driver for growth in recent years and now accounts for about 40% of total company sales, should be exempt from more stringent regulatory oversight as they have in the past.”

Nutrition Clubs are generally home-based (or in some cases, use rented commercial space) “private clubs” that dispense diet shakes, herbal teas, and aloe supplements in exchange for a pay-as-you-go cash payments from customers. Pershing Square questions why regulatory agencies such as the FDA and state governments do not perform the level of regulatory oversight as they do restaurants and other food service establishments, despite these Clubs dispensing food in exchange for money. While the “private club” exemption currently enables Herbalife to avoid such regulatory inspection or scrutiny in the U.S. and many other countries.

The analysts would be concerned if this were to change, simply because Nutrition Clubs have, “in our opinion, been the single most important factor for growth and global expansion for Herbalife in the past several years.”

However, they end of noting that “nonetheless, this issue would have no bearing on whether or not Herbalife could be considered a pyramid scheme.” Wedbush maintains its outperform rating on Herbalife and their $54 price target.