muscleman Posted March 27, 2014 Share Posted March 27, 2014 Anyone taking a significant long/short position here? :P Link to comment Share on other sites More sharing options...
cubsfan Posted March 27, 2014 Share Posted March 27, 2014 It will be an interesting battle with Icahn getting 3 board seats. I have a lot of respect for Ackman, but Icahn too. I'll watch from the sidelines. Link to comment Share on other sites More sharing options...
siddharth18 Posted March 27, 2014 Share Posted March 27, 2014 I did some digging on HLF about 1 year ago (and my comments are posted in this thread). Ackman is fighting an uphill battle and is all but guaranteed to lose if status quo prevails because the onus is on him to bring HLF down. What's clear to me is that with each step Ackman takes, we're closer to the judgement day - aka the day when FTC concludes its investigation with either: (1) A complete shutdown, (2) A change to HLF's business model, or (3) A slap on the wrist. In case #1 I think the fact that HLF isn't incorporated in USA or that USA is only a fraction of its revenues makes it seem like it won't be a zero. In case #2 I think if FTC says HLF can't operate an MLM, there will still be business left in USA for HLF similar to how it operates in China. There are end users who consume HLF one way or another so there will be supply, if there is demand. In case #3 a few million fine, a possible LBO and a short squeeze? Ackman redemptions? Icahn chest thumping? HLF longs gloating? I'm exaggerating here, but I think even the shorts will agree that the share price definitely won't be in the sub-$50/share area if it's a mere slap on the wrist. To me, case #2 and #3 seem more likely. There will be SOMETHING out of the investigation to make it seem like the FTC did its job and to put the issue at rest, once and for all. To me, it seems unlikely that HLF will be shut down. HLF does a lot of lobbying and the last thing government wants to be seen as, is someone who kills a company to make a hedge fund manager rich. But not just that - if there's a real demand and the dearth of "victims" then it'll be hard to flog HLF. Let's not forget that HLF isn't some new kid on the block and this isn't the first time FTC will be looking at HLF. I see no need to turn to LEAPs here, thereby introducing unnecessary time pressure into this. I agree that LEAPs introduce a timing element into the outcome but they would only be unattractive if you think the FTC outcome will take more than 2 years. Remember, no news is good news for HLF. If it does take 2 years, does it not make it more likely that HLF will be exculpated? And if it does go to $0, why not opt for LEAPs and get a multi-fold potential upside? Do you have reason to believe (one way or another) that FTC will/won't take more/less than 2 years? In the 2 years, HLF would've produced substantial free cash, nonetheless. Link to comment Share on other sites More sharing options...
walt373 Posted March 28, 2014 Share Posted March 28, 2014 I never understood why Ackman and other shorts insist the stock is going to $0 when HLF only does 20% of its business in the US. Do they have such a good understanding of foreign laws and regulators? I doubt it. Link to comment Share on other sites More sharing options...
siddharth18 Posted March 28, 2014 Share Posted March 28, 2014 CEO Michael Johnson holds 4.4 million shares per the proxy (likely majority of his net worth I'm guessing). http://www.sec.gov/Archives/edgar/data/1180262/000119312514118796/d684334ddef14a.htm#tx684334_47 Other executives hold shares in the millions of dollars as well. Any guesses whether the CEO or the executives hedged their exposure? And they have hedged, would it have to be disclosed? Link to comment Share on other sites More sharing options...
sswan11 Posted March 28, 2014 Share Posted March 28, 2014 I never understood why Ackman and other shorts insist the stock is going to $0 when HLF only does 20% of its business in the US. Do they have such a good understanding of foreign laws and regulators? I doubt it. Ackman said in his most recent conference call that HLF would be brought down in a "flurry of litigation" in the US and other countries would follow suit. He said he is "100% sure" that HLF is a pyramid scheme. There are endless articles on Seeking Alpha on HLF, mostly repetitive and lacking substance, but a recent one by Dr. William Keep, who co-authored a paper with the FTC's chief economist, Peter Vander Nat, on MLMs seems worrisome for Herbalife given his consultant connection with the FTC. http://seekingalpha.com/article/2102913-herbalife-mlms-and-the-unhappy-folks-of-whoville It seems to me that this has become political, since the FTC is the main player with a Obama-appointed director who apparently responded to letter from Mass. Senator Markey (who was solicited by Bill Ackman and who's Republican opponent has now filed an ethics violation re Markey's letters to SEC and FTC). How to handicap? Will the FTC change direction from prior rulings to more severely reign in Herbalife and MLMs in general? Link to comment Share on other sites More sharing options...
ni-co Posted March 28, 2014 Share Posted March 28, 2014 I see no need to turn to LEAPs here, thereby introducing unnecessary time pressure into this. I agree that LEAPs introduce a timing element into the outcome but they would only be unattractive if you think the FTC outcome will take more than 2 years. Remember, no news is good news for HLF. If it does take 2 years, does it not make it more likely that HLF will be exculpated? And if it does go to $0, why not opt for LEAPs and get a multi-fold potential upside? Do you have reason to believe (one way or another) that FTC will/won't take more/less than 2 years? In the 2 years, HLF would've produced substantial free cash, nonetheless. I wouldn't say that LEAPs are a bad choice here, but I'm also not sure whether they'd really improve the risk/reward ratio. I doubt that no news would be good news. Especially if HLF became a political issue, it might become very noisy and this would probably depress the share price (very much like a law suit threat). In this scenario, fundamental data would become quite irrelevant until the real consequences for HLF would be clear at the very end. Would it take longer than two years? I don't know. Link to comment Share on other sites More sharing options...
muscleman Posted April 11, 2014 Share Posted April 11, 2014 http://www.marketwatch.com/story/herbalife-falls-13-on-report-of-criminal-probe-2014-04-11?siteid=yhoof2 Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted April 30, 2014 Share Posted April 30, 2014 This is now a "full" position for me. I like the buyback over dividends route - works very well for my 2016 call options. Link to comment Share on other sites More sharing options...
siddharth18 Posted April 30, 2014 Share Posted April 30, 2014 http://www.businessweek.com/news/2014-04-29/jana-s-rosenstein-joins-ubben-saying-herbalife-no-pyramid-scheme I think Ackman has a $1B paper-profit on his Allegran shares. It's just his ego driving the fight more than the money it seems to me. Link to comment Share on other sites More sharing options...
fareastwarriors Posted May 2, 2014 Share Posted May 2, 2014 http://dealbook.nytimes.com/2014/05/01/u-s-looks-into-wagers-pro-and-con-on-herbalife/?_php=true&_type=blogs&ref=business&_r=0 U.S. Looks Into Wagers, Pro and Con, on Herbalife Link to comment Share on other sites More sharing options...
VersaillesinNY Posted May 6, 2014 Share Posted May 6, 2014 Pershing Square Documentary on Herbalife Distributors Money is a strange business. People who haven't got it aim it strongly. People who have are full of troubles. Ayrton Senna Link to comment Share on other sites More sharing options...
Grenville Posted May 6, 2014 Share Posted May 6, 2014 Pershing Square Documentary on Herbalife Distributors Money is a strange business. People who haven't got it aim it strongly. People who have are full of troubles. Ayrton Senna Thanks for sharing. If this is how Herbalife works, I really don't understand why anyone would buy this stock. Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted May 6, 2014 Share Posted May 6, 2014 at least half of the "money lost" the former distributor's in the video describe are incidental (i.e. the guy who said he was $14,000-18,000 in the hole had $800 of product - what did herbalife sell them other than product?). One guy mentioned he had credit card debt... I feel like this is the same as any other sole proprietorship that people take upon their own volition. The clips of mark hughes are from the 80s.... The guy who mentioned that "Herbalife is like playing a slot machine" hit the nail on the head. What's the disclaimer/disclosure all brokerages/investment schemes make you sign? "All investments come with the risk of losing money." - Would anyone call into Wynn's conference call accusing them of defrauding thousands of honest hard working people? Link to comment Share on other sites More sharing options...
siddharth18 Posted May 7, 2014 Share Posted May 7, 2014 I love how Pershing will spend all the money it can to distribute its video, outside the financial community. Towards the end they said "Pershing reimburses travel costs"...I'm trying to picture the AD Pershing placed somewhere to entice those people - "FREE TRIP TO NEW YORK~ALL YOU HAVE TO DO IS SAY HOW BAD HERBALIFE IS" I doubt that they'll mention they are gathering mob of disgruntled distributors in order to make $1B from their short position. If Point A = Herbalife as a status quo and Point Z = Herbalife completely shut down, I assume it takes a certain type of conviction to bet on Point Z and bet that there's no type of compromise/change in business model, etc the company would attempt it'd be shut down. Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted May 7, 2014 Share Posted May 7, 2014 The risk in going long herbalife is that the government will ignore its own (FTC) advisory made in as recent as 2004. I take it none of you guys have ever tried to do a franchise venture? McDonalds, Dunkin, etc? There are plenty of disillusioned would-be upstarts that end up selling at a loss back to the parent company. You could even make the argument that the franchiser is selling the franchisee overpriced products (how much does it cost to ship out those dollar menu items frozen?)... A prepackaged business opportunity costs money and of course the allure of "easy money" is always prevalent... doesn't matter what business. I think the scrutiny will make herbalife better - hell they have a refund policy. Try starting a fast food joint and seeing what the recourse is for unsold product... Link to comment Share on other sites More sharing options...
sswan11 Posted May 7, 2014 Share Posted May 7, 2014 What do you guys think is the best way to short Herbalife? Well, you could buy the same Jan15 50 put options that Ackman apparently did this January, in size. Link to comment Share on other sites More sharing options...
Liberty Posted May 7, 2014 Share Posted May 7, 2014 Yes, Herbalife is just like the fast food franchise world. Most fast-food franchise owners are regular, non-business savvy people who were out of traditional jobs and kind of tight on money, so to make ends meet they figured, hey, I can be self employed, I'll open a McDonald's! It doesn't matter that their particular McDonald's sells burgers for $15 a pop, the money is supposed to come from signing up a lot of other people to be franchise owners anyway. Who cares that the business couldn't work as a standalone restaurant without the chain-letter aspect when you have a multi-level network of other franchises working under you and sending you juicy royalty checks from all the new franchises owners that they're signing up! In fact, I bet many of the people you see in the Pershing Square video are serial franchisers. I suspect many of them have owned Subways, Wendys, and Burger Kings before they jumped into Herbalife. I swear that lady who looks like a cancer survivor has served me a fajitas somewhere! Serves them right for falling for the publicity targeting them during prime time shows and believing what was drilled into their heads by expert salespeople and true life testimonials from people just like them. I guess my only question is, who here is an Herbalife distributor? There must be many, right? I'm thinking I need to make some extra money to invest, just a few thousands a month, so maybe I should sign up. Can anyone send me a form and show me the ropes? Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted May 7, 2014 Share Posted May 7, 2014 Yes, Herbalife is just like the fast food franchise world. Most fast-food franchise owners are regular, non-business savvy people who were out of traditional jobs and kind of tight on money, so to make ends meet they figured, hey, I can be self employed, I'll open a McDonald's! It doesn't matter that their particular McDonald's sells burgers for $15 a pop, the money is supposed to come from signing up a lot of other people to be franchise owners anyway. Who cares that the business couldn't work as a standalone restaurant without the chain-letter aspect when you have a multi-level network of other franchises working under you and sending you juicy royalty checks from the new franchises owners that they're signing up! In fact, I bet many of the people you see in the Pershing Square video are serial franchisers. I suspect many of them have owned Subways, Wendys, and Burger Kings before they jumped into Herbalife. I swear that lady who looks like a cancer survivor has served me a fajitas somewhere! Serves them right for falling for the publicity targeting them during prime time shows and believing what was drilled into their heads by expert salespeople and true life testimonials from people just like them. I guess my only question is, who here is an Herbalife distributor? There must be many, right? I'm thinking I need to make some extra money to invest, just a few thousands a month, so maybe I should sign up. Can anyone send me a form and show me the ropes? I submitted for a kit the first time I took a position (sold out of the position in the $70s). I actually had to go through 2 distributors - the first was either short on product/or wasn't able to get it to be in time. I submitted for a refund - which took about 2 months to process but my "investment" was restituted. Some of the people in the video were disadvantaged or lacked education or just kept going in deeper and decided not to refund their product for whatever reason, ok. But herbalife has provided an avenue for remuneration. I guess you just want them to fold up shop and raise a white flag. ??? Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted May 7, 2014 Share Posted May 7, 2014 Also Liberty, I may not have been clear when I referred to "starting a franchise venture." I mean actually creating and selling the right to be the franchiser of one's own "business model." As in you get a bunch of people enticed, they pay you a royalty fee for start up advice/business plan/ trademarks etc.... A lot of crappy franchises have incredible churn. It's essentially the same thing as the MLM model except with less layers of distributors (who are essentially a form of product delivery). You give someone the right to franchise your concept, maybe even sell them a geographic monopoly and let them sell the rights in a region (oddly similar to a downline no?). Link to comment Share on other sites More sharing options...
fareastwarriors Posted July 7, 2014 Share Posted July 7, 2014 Retiree With Sixth-Grade Education Says Herbalife Shakes Cost Him $30,000 http://www.bloomberg.com/news/2014-07-07/retiree-says-herbalife-shakes-cost-him-30-000-in-savings.html Link to comment Share on other sites More sharing options...
fareastwarriors Posted July 21, 2014 Share Posted July 21, 2014 Herbalife Shares Fall After Ackman Says Company Will ‘Collapse’ http://www.bloomberg.com/news/2014-07-21/herbalife-shares-fall-after-ackman-says-company-will-collapse-.html Link to comment Share on other sites More sharing options...
sswan11 Posted July 21, 2014 Share Posted July 21, 2014 interesting that Ackman schedules presentation just before Herbalife reports earnings on 7/28 Link to comment Share on other sites More sharing options...
Matson125 Posted July 21, 2014 Share Posted July 21, 2014 Does anyone have access to the full Bloomberg Interview? From the clips that Bloomberg posted the interviewer asked him when his puts expire and the clip ended before he answered. Thanks Michael Link to comment Share on other sites More sharing options...
siddharth18 Posted July 21, 2014 Share Posted July 21, 2014 Interesting. Ackman has been upping the ante (verbally at least) since the start and it seems we're in the final innings to find out whether HLF will be guilty or exonerated in the public opinion. It gets interesting when you start throwing around words like "Enron" ... Will the event be live streamed tomorrow? I'll definitely be following. Link to comment Share on other sites More sharing options...
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