Herbalife Ltd. (NYSE:HLF) uber bull Tim Ramey announced yesterday he is leaving  his job at DA Davidson to do ”some consulting on strategy, M&A, and corporate development for a significant company working with executives where I have had a long and productive relationship.”

New also broke that Bill Stiritz, the largest individual stockholder (Icahn is not a “individual” holder) has hired Ramey to help in his past stated efforts at an LBO for the company.

Herbalife HLF
Herbalife Ltd. (HLF)

Herbalife Ltd. (NYSE:HLF): CNBC reported it:

This reeks. Is it an analysts job to have a “long and productive relationship” with a company they follow?

It delegitimizes the entire “analyst” model. I would also be saying the same thing if an analyst who was negative then went and worked for a short seller in a specific company. Because they are in fact giving investing advice on the companies they cover, they ought to be prohibited from then working for/with them for at least a year post employment with the firm they “analyze” for. How can we trust what they are saying is really an honest opinion or simply a ploy to grab a higher paying gig down the road. Now, many who have invested for years will scoff at this and say “nobody listens to those guys anyway”. I’d simply respond by superimposing a stock chart over an analysts buy or sell ratings on a given stock.

Somebody is doing all that buying and selling and it isn’t Joe Retail investor.

It isn’t just this scenario either.

Take a listen to any earnings call of salesforce.com ( CRM). It is the same handful of analysts who heap glowing praised on Benioff and the company and then ask softball questions that allow him to pontificate for 15 minutes. After about 5-10 questions, the call is over. I challenge anyone who has ever written anything negative about the company to get on that call…..go ahead…you may get in the cue but they will always “run out of time” before they get to you. The fluffers always get their time though.

Remember when Einhorn snuck into an  Herbalife Ltd. (NYSE:HLF) call (the last time he snuck on)? Ackman has tried several times to get on  Herbalife Ltd. (NYSE:HLF) calls and been rebuffed.

Contrast that to the last Bank of America ( BAC) earnings call. CEO Brian Moynihan took questions until the near 2 hour mark and quit when the operator said “there are no more questions in the cue”.

Back to Herbalife. Rumor is Stiritz is trying to organize an LBO. Given the fact US Senator Ed Markey just sent two letters asking the SEC and FTC to investigate the company, China is investigating the whole MLM model (most ofHerbalife Ltd. (NYSE:HLF) ‘s growth is coming from there) and now it seems even Canada is looking into them, what lender is going to put up a couple billion for Stiritz to make a bid? Now bulls will naturally say about the Canada news, “that is the NY Post, you can’t believe it”. It is the “no comment” by Canadian regulators that has to have one take notice. Regulators are pretty quick to deny they are doing something they are said to be doing if they aren’t. Not denying they are looking leads one to believe they in fact are.

This is especially so when one considers the possible outcome of any investigation. This isn’t a rouge bank trader where the bank will be fined a few million dollars, this is “you are a pyramid scheme, game over”. It inconceivable any bank backs a bid facing that until US regulators issue it a clean bill of health. Now, perhaps Stiritz finds some like minded private investors to back a deal, but if that is the only route available, the odds of getting that financing falls pretty fast. The only advantage to a private investor getting in now might be for the short squeeze action. But now that Ackman has reconfigured his  short to include options, even that avenue is off the table.

This looks more to me like a last ditch effort by Ramey/Stiritz. Ramey staked his name and reputation with his comments on Herbalife and now it seems is trying anything to drum up interest anyway he can. Same goes for Stiritz. If you take a look at Stiritz’s 13D in  Herbalife Ltd. (NYSE:HLF), he isn’t acting like someone who is building a stake for a takeover. He is acting like someone trading news for some quick gains. Just look to Sept 23rd when Ramey first said a leveraged recap was coming for  HLF (5 days after Stiritz bought call options on 700k shares). On Sept 23-25th Stiritz was selling shares. Then on Oct 3rd when Ramey attacked Ackman’s letter to his investors, that prompted more selling by Stiritz the next day.

It might seem Ramey and Stiritz have been working together for some time. Unless you are as huge believer in coincidences in this stuff……I’m not

The bottom line here is Ramey lost his legitimacy a long long time ago. His move means nothing and I would not be surprised if it was a mutual separation. His lack of objectivity was obvious and probably an issue at DA Davidson (at least I hope it was).

As I’ve said before my short in this makes no claims as to whether or not  Herbalife Ltd. (NYSE:HLF) is in fact a pyramid scheme (FTR I think most MLM’s are). My short is based on a regulator somewhere doing a deep dive into the company. Those who bought and went along for the Icahn ride at this point are weak money. They’ve made as ton and have little reason to see who wins this in the end. They will bail as fast as they can when a regulator announces an investigation (which I obviously think will happen given the publicity here). If one doubts this just look at the price action in the past week from Markey’s letter.

If I am wrong and  Herbalife Ltd. (NYSE:HLF) goes to $200, I am out a couple percent, no big loss when one considers the potential gain here.