Herbalife Ltd. (NYSE:HLF) executives might be thinking that Bill Ackman’s “epic” presentation that was supposed to put a nail in the coffin of the nutritional supplement company has put a dent in Ackman’s short position.
John Desimone buying Herbalife shares
Insiders at Herbalife Ltd. (NYSE:HLF), including Chief Financial Officer John Desimone, are putting their money where their mouth is and buying Herbalife shares.
As Barrons reported over the weekend, Desimone purchased 10,000 shares for just over half a million dollars. Three other top executives chipped in and purchased over 30,000 shares. Shares in the stock have tumbled, down nearly 20 percent since an earnings miss on July 28 showed revenue missed estimates by nearly 4%.
The revenue drop followed by Ackman’s “miss” on the presentation might have these Herbalife Ltd. (NYSE:HLF) executives thinking the blood on the street won’t get any worse – and that a regulatory ruling the company has not violated the law in how it has conducted business for the past thirty years may provide some relief.
This is all speculation, but the fact the company’s core multi-level business model has endured this long leaves one to wonder if regulators will discover something significant has occurred more recently.
Problem in documenting malfeasance
The problem in documenting such malfeasance is that in the Internet age of data storage and collection of every utterance ever imagined documenting improper sales tactics might have been easier than in the 1980s and 90s. In the old days, when a wire tap was required to record phone conversations, tracking the abusive sales tactics of shady salespeople was likely harder. Much harder.
The issue going forward could be earnings. While results for Herbalife Ltd. (NYSE:HLF) could have been worse – and if Ackman’s claims were true, one might expect sales to fall even more – watching future earnings declines may signal a negative trend is emerging.
Sales and revenue have been dented during a difficult time for Herbalife, as one might expect. The issue is: Will Ackman break Herbalife?
That’s a question that might not be answered immediately: A regulator is likely to make that call. For now we can only muse at the current stock price trading near $50 per share near one year technical support and consider the consequences of a break.
A break below $50 per share would be a technical indicator of additional selling to come and it would be a fundamental blow to those Herbalife Ltd. (NYSE:HLF) executives who think have purchased on a drawdown.