Herbalife Ltd. (HLF): Nothing But ‘Snake Oil,’ Says Regal Point

Herbalife Ltd. (HLF): Nothing But ‘Snake Oil,’ Says Regal Point

While Bill Ackman has been basically monopolizing the short view of Herbalife Ltd. (NYSE:HLF) with his continual attacks, now another hedge fund manager is getting in on the action. Vijay Marolia of Regal Point Capital Management told ValueWalk that he trusts Ackman’s due diligence more than he does Carl Icahn’s.

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New short thesis on Herbalife

Regal Point issued its short thesis on Herbalife Ltd. (NYSE:HLF) last week. The firm states that Herbalife’s business model is not sustainable and that while recruitment is vital to success, it becomes difficult to recruit while regulators are scrutinizing the company. Marolia’s firm also points to the recent ABC News investigation into the controversial company, increasing regulatory probes, and sell-offs of Herbalife stock by institutional investors.

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On the bullish side, Regal Point does say that Herbalife Ltd. (NYSE:HLF)’s valuation looks cheap as its business grows. It plans to complete $266 million worth of share buybacks during the second quarter, and Carl Icahn and other big investors “seem to like it.” In addition, Herbalife has been around for more than 30 years and operates in more than 90 different countries.

The firm does state, however, that it is maintaining its short position in Herbalife Ltd. (NYSE:HLF), siding with Bill Ackman. “The best companies to short involve fraud, fads, and failures–this company fits all three,” Marolia said.

Selling snake oil?

In an email, fund manager Vijay Marolia told ValueWalk that he believes a “Snake Oil” salesman started Herbalife Ltd. (NYSE:HLF) and that its “entire business model is based on recruiting new snake oil salesman [sic].” He also explained why he sides with Bill Ackman rather than Carl Icahn.

“If there’s one thing you can count on regarding Bill Ackman, it’s this–he has done some intense due diligence,” Marolia told ValueWalk. “If there’s [sic] two things you can count on regarding Carl Icahn, one is that he has NOT done nearly as much DD, and two, his main motivation is rooted in revenge.  He’s trying to get back at Bill for the whole ‘shmuck insurance’ ordeal.”

Why hasn’t Herbalife settled the issue?

Marolia also points out that Herbalife Ltd. (NYSE:HLF) could put an end to all the debate very quickly if it wanted to. Ackman has repeatedly called the nutritional supplements company a pyramid scheme. One of the things regulators may be considering in their investigation is how much of Herbalife’s sales are to end customers outside its membership. He believes if the company just disclosed details about its retail sales, the fight would be over. He also questions whether it’s “really cheaper to burn millions on lobbying.”

The hedge fund manager also had some critical comments for regulators, saying they’ve been “embarrassed repeatedly for being asleep at the wheel” and that their investigation is now their “chance to save face.”

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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  1. pyramid scheme****

    “According to data provided by the company to prospective distributors, in 2013, only 2,551 of the company’s 525,251 U.S. members earned more than $25,000. That is just under one-half of 1 percent.”

    “Only about half of those made more than $50,000.”

    “Paltry numbers, especially considering that the company reported sales of $4.8 billion in 2013 and $1.3 billion for the first quarter of 2014—an increase of 12 percent over the previous year.”

  2. Dream on, Ackman has already made adjustments to cover this, he’s not a billionaire for nothing. LOL

    Did you see another large investor shorted HLF stock recently?

  3. Another hit piece…. just paid for trash. It was amazing they tried to throw in a little bullishness. Actually, I’m going to talk to a lawyer about this author labeling me a snake oil salesman. Because that is just a stereotypical smear of a huge munber of people that they don’t know.

    As for the facts concerning ackman’s DD. His analyst was busted totally out by fusion research on Seeking alpha investors blog a year ago. Ackman’s got nothing. In fact, he is probably covering his short now while advertising others to get in so he doesn’t lose so much….. That’s Ackman…. and it even says so in his disclaimer.

  4. all the big boys increased there stake…soon there will be no shares to short, then they SQUEEEEEEZE ackman and all his followers with the greastest short squeeze in history….I hope ackman is forced to cover at about 250 per share

  5. that only happens in the movies…those ftc employees would love a job working for Icahn or soros..ftc is just training for better job later..Icahn, soros, perry, bass, these are the men they hope to work for some day.

  6. It’s up ONLY because they are doing a huge buy-back. They can laugh all of the way to jail in handcuffs once the investigation is further along. THEN we’ll see how the stock does. LOL

  7. those high level officers are laughing their ass off at all these idiots shorting the stock and buying puts. they are laughing all the way to the bank..stock is up again today over 2 percent…up 25 percent AFTER FTC AND FBI made the announcements. funny way of going to zero. I guess its going to ONE ZERO ZERO.

  8. Of course it’s possible for it to go to zero. The regulators shut it down and disgorge the corporation, high level officers, and high level distributors of everything they own. LOL

  9. It won’t matter when the regulators shut them down and disgorge the corporation, high level officers, and high level distributors of everything they own. LOL

  10. I put my money where my mouth is in a manner to maximize the impact. For less than $500, I have over 1.5 million impressions and over 10,000 clicks on my online advertising. LOL

  11. Icahn and friends do not want this over with soon..the longer it drags on the more puts they can sell and the more suckers will actually short the stock.. they make a lot more money the longer it drags on.. 55 is the key level for the put sellers. 90 percent of all puts sold are at 55 strike price or less so all Icahn and his billionaire buddies need is to keep it above 55 til investigation is over then the short squeeze will end the game

  12. meanwhile back at the ranch THE STOCK IS UP THIS MONTH…..bill stiritz, carl Icahn, George soros and several other billionaires who are long the stock and selling puts have done their own investigation…this group of billionaires have a lot better investigators, lawyers, and analysts than the government could ever hire.. do you think Icahn would have put so many on the hlf board if he had not done a thorough investigation…DUE DILIGENCE..it is what these billionaires do and they do it very well, ackman on the other hand NOT SO MUCH I use j c penny , target. and now hlf as my examples…these billionaires just keep selling puts and the puts just keep expiring worthless.. and once these investigations end and hlf gets a fine and a slap on the wrist the stock goes to 100 bucks a share and all the shorts will be SQUEEEEEZED like volkswagon was..this is going to make a great movie once it is over….one more thing…only 18 percent of hlf sales are in the united states so WHAT IS THE WORST POSSIBLE OUTCOME?? they lose 18 percent of there sales…IT IS NOT POSSIBLE FOR IT TO GO TO ZERO…

  13. I only know of 2, and I’m not 100% sure of them, because I haven’t fully researched them. Tupperware and Pampered Chef. I believe both have adequate retail sales to non-distributors and no tool scam.

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