Herbalife Ltd. (HLF) In Lobbying Frenzy, Works On ‘All Star Line-Up’

Herbalife

In a sign of the times, Herbalife Ltd. (NYSE:HLF) is defending itself from fraud charges by pulling together an “all star” lineup of Hispanic lobbyists to combat the lobbying efforts of activist investor Bill Ackman.

Public battle to talk down a company

As previously reported in ValueWalk, Ackman, head of hedge fund Pershing Square Capital which has a $1.1 billion bet against Herbalife Ltd. (NYSE:HLF), has engaged in a rather public battle to talk the price of the stock down.  He has compared Herbalife to a pyramid scheme because distributors recruit distributors who recruit distributors, creating an ever-lasting commission trail. Ackman has engaged in a rather public war of words with activist investor Carl Ichan, who is long the stock.

Herbalife hires Hispanic political muscle

Herbalife Ltd. (NYSE:HLF) is now responding by rounding up Hispanic political muscle.  According to a report in The Hill, Herbalife Ltd. (NYSE:HLF) spent close to $1.3 million in 2013, up from spending nearly $560,000 on political influence in 2012. In 2013, Herbalife signed up with four new lobby firms: The Glover Park Group, Podesta Group, Ogilvy Government Relations and The Raben Group. The roster includes some of Washington’s most prominent Hispanic lobbyists, including Cristina Antelo at Podesta; Dean Aguillen and Moses Mercado at Ogilvy; and Robert Raben and Estuardo Rodriguez at the Raben Group, the report noted. The company has also hired connected Hispanic government officials. Former State Department official Maria Otero and ex-Surgeon General Richard Carmona have been named to the company’s board of directors, while the report noted Angela Arboleda, once a senior aide to Senate Majority Leader Harry Reid (D-Nev.), has joined the company, as former Los Angeles Mayor Antonio Villaraigosa has been named a “senior adviser.”

Herbalife acknowledged the spending was in a direct response to Ackman’s activist efforts to force regulatory pressure to bear on the firm.  Hispanic support is critical because the company’s customer base is nearly 60% Hispanic.  “For the past year and a half, we have faced a coordinated, well-funded attack from notorious hedge fund manager Bill Ackman, motivated by one thing: winning a billion dollar bet he made against Herbalife. The expansion of our team is in direct response to his attacks and his hiring of multiple lobbyists, PR firms and so-called grassroots organizers,” an Herbalife Ltd. (NYSE:HLF) company representative was quoted as saying in the report.

Ackman’s lobbying attempts to use government regulators as a weapon to make his short bet in the company pay has come under fire.  “It looks like an effort to move the stock price rather than spread the truth,” said Pitt, now CEO of Kalorama Partners, a regulatory and legal consulting firm he founded.  In a CNBC interview Pitt said that Ackman’s tactic of influencing regulators to act against a stock he has shorted is questionable.  “If you’re trying to spread the truth, that’s OK,” he was quoted as saying. “If your trying to move the price of a stock to vindicate your investment philosophy.  It looks like he crossed that line.”

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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