Bill Ackman is not letting Herbalife (and Dan Loeb) get away with out a fight. Despite the huge news about David Einhorn going activist (and suing) Apple, there is big news on the Herbalife Ltd. (NYSE:HLF) front. A press release was just issued by Bill Ackman’s Pershing Square, which we have just received an email of. Ackman notes that Herbalife welcomes transparency and has released questions related to Herbalife’s business model, and says that he looks forward to the company’s response. Ackman will also be talking about Herbalife Ltd. (NYSE:HLF) at an upcoming conference on Wednesday the 13th of February. ValueWalk will be attending the conference and providing live updates as well as in depth analysis.
Bill Ackman, says, “Herbalife management has repeatedly stated its commitment to total transparency, saying that the Company will answer any and all questions about Herbalife, its business model, and its products. In response to this invitation, we have prepared a substantial number of detailed questions, the answers to which should assist the public in understanding Herbalife. We look forward to the Company’s answers.”
Seth Klarman's Baupost is one of the largest hedge funds in the world, and it utilizes a long-only, value-focused investment process. However, some well-known names have suggested that value investing is dead, so where does that leave Baupost and other highly reputable value investors? Klarman had some insight in his year-end letter for 2021. Q4 Read More
The first question from Ackman is:
Based on Herbalife’s reading of the 2004 FTC Staff Advisory Opinion, the Company appears to conclude that “the primary motivation for purchasing should be resale and / or consumption.” This conclusion suggests that Herbalife believes that internal consumption is otherwise indistinguishable from independent third-party sales in the FTC’s determination of a pyramid scheme. As recently as November 2012, however, the FTC published the following on its website: “One sign of a pyramid scheme is if distributors sell more product to other distributors than to the public – or if they make more money from recruiting than they do from selling.”
In light of the FTC’s November 2012 statement, why does the Company continue to look to
the FTC’s 2004 Opinion for guidance as to whether or not internal consumption is a red flag
for a pyramid scheme?
The full Q&A is embedded below in Scribd:
Questions for Herbalife from Bill Ackman by