Herbalife Ltd. (NYSE:HLF) hosted an investor day in response to all the allegations raised by William Ackman of Pershing Square. The nutritional supplements company has become a juggling ball among investors, where Dan Loeb called it a “Classic Compunder” in response to Ackman famously calling it a “Pyramid Scheme”.
At the investor day hosted by the management of Herbalife Ltd. (NYSE:HLF), several of its top ranking officials pointed out many falsehoods that they believed were presented in Pershing Square’s thesis. The company’s President, Des Walsh, said they sell to distributors and that its not any different from Costco Wholesale Corporation (NASDAQ:COST), whose model is also based on multi-level marketing. He said that it “simply baffles us” how Pershing Square could get all its information wrong after a year and a half spent on research. He also quashed the notion projected by Pershing that their nutrition clubs look like country clubs, contesting that these clubs are “about a shake, a tea, an aloe and a hug,” ,“I know in this community hugging is probably not something you do a lot of, but let me share with you ,the world needs more hugs.”
Earlier this month, value investor Mohnish Pabrai took part in a Q&A session with William & Mary College students. Q3 2021 hedge fund letters, conferences and more Throughout the discussion, the hedge fund manager covered a range of topics, talking about his thoughts on valuation models, the key lessons every investor should know, and how Read More
Kim Rory, VP of Liberman Research also gave his testimonial on the consumer visibility of the company. He said the brand awareness of Herbalife was over 70 percent, and that 5 percent of adults in US have bought supplements from Herbalife Ltd. (NYSE:HLF). In his research, 73 percent of its former distributors would like to work again for the company.
An interesting story that Herbalife’s CFO, John DeSimone, told was about a Herbalife Ltd.(NYSE:HLF) conference where a Pershing employee asked irrelevant questions regarding the company and ‘tried to conceal his identity’. DeSimone replied, “If Bill wants to learn about Herbalife, please have him give me a call”. But instead Ackman chose to go public with false accusations.
The Chief Operating Officer, Richard P. Goudis, said that contrary to what Ackman would have you believe, spendings in the R&D sector are not hefty. He said that they came at $0.6 million, which is nothing when compared with other companies like, GNC Holdings Inc (NYSE:GNC), which operates in the same business sector. However, he accepted that last year the expenditures peaked at $44 million due to costs related to ingredient supplies. Goudis also pointed out that Herbalife Ltd. (NYSE:HLF) operates 600 distribution centers rather than 3, as pointed out in Ackman’s presentation.
Stay tuned, we will update you on the Q&A session in the next post.