HLF - Herbalife

[LongTermView]

I'm on the sidelines but John Oliver made some good points for the shorts...

[Liberty]

 

If only the government is willing to do more to get rid of all these MLM companies...

 

Except Pampered Chef, right?

 

If they use the same practices as other MLMs described in the piece, they need to go too. But I really don't know them or their practices, so I can't say for sure.

[Liberty]

 

If only the government is willing to do more to get rid of all these MLM companies...

 

Except Pampered Chef, right?

 

If they use the same practices as other MLMs described in the piece, they need to go too. But I really don't know them or their practices, so I can't say for sure.

 

I agree. I don't believe in the cult of Buffett. He too is fallible.

 

You mean he's human? Sure.

[fareastwarriors]

For Better and Worse, Ackman's Still Betting Against Herbalife

 

https://www.bloomberg.com/view/articles/2017-03-01/for-better-and-worse-ackman-s-still-betting-against-herbalife

[LongHaul]

Just watched Betting on Zero and read the FTC Complaint on Herbalife. 

 

Ackman was totally right about Herbalife making its money largely by duping people into becoming distributors.

HLF didn't offer participants a viable retail opportunity. The weight loss product seems like crap from a nutritional perspective and the products are apparently overpriced.  This is a very immoral company.

 

The problem is that it has been a slow burn and may have a lot of fuel left.  Who knows when that will be. 

Only ~20% of Sales are in the US also.

 

I give Ackman credit for researching this and pursuing it.  Lots of people have suffered from this company's actions.

[Hielko]

Just watched Betting on Zero and read the FTC Complaint on Herbalife. 

 

Ackman was totally right about Herbalife making its money largely by duping people into becoming distributors.

HLF didn't offer participants a viable retail opportunity. The weight loss product seems like crap from a nutritional perspective and the products are apparently overpriced.  This is a very immoral company.

 

The problem is that it has been a slow burn and may have a lot of fuel left.  Who knows when that will be. 

Only ~20% of Sales are in the US also.

 

I give Ackman credit for researching this and pursuing it.  Lots of people have suffered from this company's actions.

Don't you think that applies to basically every MLM company? If you are actually selling something that is really valuable to consumers you don't need the whole MLM structure. And too be honest, lots of other companies also make a living by selling stuff people don't need. Doesn't make it smart to bet against them.

[LongHaul]

Just watched Betting on Zero and read the FTC Complaint on Herbalife. 

 

Ackman was totally right about Herbalife making its money largely by duping people into becoming distributors.

HLF didn't offer participants a viable retail opportunity. The weight loss product seems like crap from a nutritional perspective and the products are apparently overpriced.  This is a very immoral company.

 

The problem is that it has been a slow burn and may have a lot of fuel left.  Who knows when that will be. 

Only ~20% of Sales are in the US also.

 

I give Ackman credit for researching this and pursuing it.  Lots of people have suffered from this company's actions.

Don't you think that applies to basically every MLM company? If you are actually selling something that is really valuable to consumers you don't need the whole MLM structure. And too be honest, lots of other companies also make a living by selling stuff people don't need. Doesn't make it smart to bet against them.

 

Maybe it does apply to MLM in general. I am not expert in MLM.  Seems like a lot of these products are sold rather than bought and it is probably an inefficient sales strategy.

 

HLF has been a disaster of a short - no question about it. 

 

[JRM]

John Oliver report is an oldie but a goodie:

[writser]

I had to post this somewhere:  https://www.wsj.com/articles/carl-icahn-sells-about-550-million-of-his-herbalife-stake-1527264459

 

Mr. Icahn is selling 10.5 million of his shares, valued at about $550 million, to the company as part of a tender offer, according to people familiar with the transaction. That would leave him with more than a 21% stake, and he would remain Herbalife’s biggest shareholder. In a Friday filing, Mr. Icahn had disclosed he tendered his stake in the company and that as many as 11.4 million of his shares could have been sold to Herbalife.

 

The billionaire said the nutritional company had become an outsize position in his portfolio and needed to be trimmed. So far this year, Herbalife stock is up more than 40%, compared with a roughly 2% gain in the S&P 500.

 

“There’s an old Icahn rule, when you make over $1.5 billion on a situation, you sell a bit,” Mr. Icahn joked in an interview.

 

8)

[Jurgis]

So Icahn pretty much screwed Ackman.

[benhacker]

So Icahn pretty much screwed Ackman.

 

Ackman screwed himself. It was a far too big position and his thesis was weak.

[TwoCitiesCapital]

So Icahn pretty much screwed Ackman.

 

Ackman screwed himself. It was a far too big position and his thesis was weak.

 

I grew up in a family that participated in multiple MLMs. I don't have anything against them, but the evidence he presented against Herbalife was pretty damning IMO. Even the investigation basically forced an entire change in HLFs business model over 12 months - basically admitting that it was operating inappropriately without calling it that.

 

I never took a position - I didn't have enough faith in the regulations playing out and have enough stress w/ that with my positions in Fannie Mae/Freddie Mac, but I actually thought this would be one where Ackman was vindicated. Having a high profile supporter like Icahn certainly threw a wrench into things.

 

If HLF has really changed, good for them. I remain skeptical and think it's a shame that this went down the way it did for him.

[Spekulatius]

MLM is about selling a dream, not a product. It has always been that way. Ackman went wrong going against a company that actually has a solid balance sheet, strong cash flow and is backed by someone who is cleverer and has as much money than he does.

[benhacker]

Two cities and spek,

 

I’m not saying HLF is a wonderful business or that MLM is good. But Ackman was “wrong” - unquestionably and bilgly.

 

The company makes good money and Ackman fundamentally misunderstood the business model. (Go find the folks who feel ripped off... the model is not what he thinks) The dishonest part (among many) is Ackman thought (I think) he could take down the whole space but HLF was arguably the best managed.  He picked it because he could build a large stake but it was the worst target.

 

Hilariously Ackman thought the model was a fraud while HLF has some of the friendliest terms for distributors of the MLM space who feel taken advantage of (they can get their money back).

 

He was dishonest in his approach, wrong in his analysis, stupid in his implementation of the trade, and he deserved all the losses he earned. (He’s had some great wins so no one needs to bring up GGP again... ;)

 

If any on this thread think HLF is a good short, that’s fine... but if you do, I think you will find many shadier MLMs out there with weaker finances to bet against.  That’s my main issue. I never invested in HLF but was tempted just cause Ackman was so wrong.

 

The fact that HLF survived the resources Ackman three at them and their financials have shown no ill is the biggest proof Ackman was wrong - despite whatever minor legal things have come up.

 

Oh, and from day one, the business was so heavy overseas that ack was clearly betting on something other that US regulation.

 

I think I even posted somewhere here. Ackman bet so large here that he had to be wrong because the whole thing smelled of terrible / reckless risk a management.

 

Again, I’m no fan of MLM and I don’t own HLF. But dead wrong is dead wrong.

 

 

[walt373]

Unbelievably, this is a real quote. https://www.newyorker.com/magazine/2017/03/06/financiers-fight-over-the-american-dream

 

But Ackman had misread the situation. He soon came to believe that Einhorn, after taking advantage of the sell-off he had prompted, then bought back his stock and completed the short, figuring that it would rise again. It looked as if Einhorn was playing a short-term game, and had no interest in convincing the world that Herbalife was going to collapse.

 

“We usually do all the work,” Ackman went on, “so I’m, like, finally, we can let David do all the work, and we’ll make a bunch of money, and everyone wins.” He sighed. “Well, it didn’t work out that way.”

[TwoCitiesCapital]

Unbelievably, this is a real quote. https://www.newyorker.com/magazine/2017/03/06/financiers-fight-over-the-american-dream

 

But Ackman had misread the situation. He soon came to believe that Einhorn, after taking advantage of the sell-off he had prompted, then bought back his stock and completed the short, figuring that it would rise again. It looked as if Einhorn was playing a short-term game, and had no interest in convincing the world that Herbalife was going to collapse.

 

“We usually do all the work,” Ackman went on, “so I’m, like, finally, we can let David do all the work, and we’ll make a bunch of money, and everyone wins.” He sighed. “Well, it didn’t work out that way.”

 

Unbelievable that he was willing to bet $1 billion largely because he thought someone else was leading the charge....

 

 

"Government investigators have found that it was almost impossible to make money selling Herbalife products, and that more than half the company’s sales came from purchases of products by its own distributors. Hundreds of thousands of new distributors joined the network each year; after losing money, or at least not making any, eighty-nine per cent of them ended up dropping out within the same year. "

 

I have as hard of a time swallowing this now as I did then - how do you determine that the bulk of the companies' sales come from distributors and not customers, and identify that 89% of new distributors fail/quit in the first year, and identify that they used deceptive marketing schemes worthy of $200 million settlement and still avoid calling them a fraud? How does the media portray that as a victory for Herbalife?

 

I didn't understand it then and I don't understand it today.

 

 

[Spekulatius]

I learned a few things from this article

 

1) There are outfits in Wall Street that actual peddle research ideas to Hedge finds and they literally do it door to door. Seems like an odd business model, but it does explain why all of a sudden many hedge funds own the same stock at the same time or initiate shorts on the same stocks at the same time.

 

2) HLF internally was judged to be a mediocre idea, then became a good idea because somebody else was in the same idea.

 

I recall the verdict against HLF very well. The $200M was a slap on the hand for a company the size of HLF. WS investment banks get these and worse all the time. However, HLF avoided the stigma of being called a pyramid scheme and fraud and that is all they needed. MLM always work on thr fringe of legality and HLF could continue to do so , even though legality was slightly redefined. That‘s all they needed.

 

The excessive research that Ackman did and the public exposure was counterproductive, everyone become more and more personally invested it become more and more about Ego than making Money.

[DTEJD1997]

Hey all:

 

Maybe I am running in the wrong social circles?

 

Prior to reading about the HLF short & it's controversy...I had NEVER even heard of Herbalife.  In the years since, I've never seen Herbalife product for sale, never had anybody try to sell me some or sign me up.  I also never heard anybody else discussing or using it.

 

I had previously heard of Amway (and had somebody try to sign me up for it), but that was 25 years ago?  Since that one time, never have I seen/heard of Amway except in relation to Betsy DeVos OR perhaps in a news report of Amway doing something in West Michigan.

 

Finally, since that one time 25+ years ago, nobody has tried to sign me up, get me to use products, or recruit others for a MLM scheme.

 

Perhaps that is good...maybe hucksters see me and figure they better steer clear...OR maybe that is bad?  What if the hucksters think, "oh man, look at DTEJD1997, he doesn't have enough going on to even try to bother with"?

 

Well, whatever it is, I hope it continues!

[Cigarbutt]

Hey all:

 

Maybe I am running in the wrong social circles?

 

...

 

Well, whatever it is, I hope it continues!

 

Wait a minute.

Maybe you are misunderestimating the potential benefits of the products:

 

Shorting a good "story" can be detrimental to your financial health.

[black-dog]

If you're not seeing any Herbalife/Amway/Younique/Young Living/etc seep into your life via Facebook/LinkedIn/random emails from old friends, I wonder if it's a demographic thing -- probably the most common way for you to get hit up or exposed is when someone gets infected with that MLM and goes through all their old college/high school/grade school/pre school/work contacts and tries to get them to buy in too. Lack of economic opportunity drives a ton of desperate people to these scams, and if you grew up in, sayyyy, somewhere not doing great, they're everywhere.

[TwoCitiesCapital]

Hey all:

 

Maybe I am running in the wrong social circles?

 

Prior to reading about the HLF short & it's controversy...I had NEVER even heard of Herbalife.  In the years since, I've never seen Herbalife product for sale, never had anybody try to sell me some or sign me up.  I also never heard anybody else discussing or using it.

 

I had previously heard of Amway (and had somebody try to sign me up for it), but that was 25 years ago?  Since that one time, never have I seen/heard of Amway except in relation to Betsy DeVos OR perhaps in a news report of Amway doing something in West Michigan.

 

Finally, since that one time 25+ years ago, nobody has tried to sign me up, get me to use products, or recruit others for a MLM scheme.

 

Perhaps that is good...maybe hucksters see me and figure they better steer clear...OR maybe that is bad?  What if the hucksters think, "oh man, look at DTEJD1997, he doesn't have enough going on to even try to bother with"?

 

Well, whatever it is, I hope it continues!

 

Seeing as the profile of a lot of their distributors tends to be less educated and lower income minority groups - it would seem that those types of individuals aren't well represented in your friends?

 

I see a lot of MLM type businesses in my social feeds - mostly Rodan & Fields skin care and a make-up MLM or two. I'd never seen or heard of Herbalife before either, but my parents were involved in Amways & Mary Kay for awhile. Worked alright for side income.

[ebdem]

A interesting video about a Herbalife long:

[TwoCitiesCapital]

Unbelievably, this is a real quote. https://www.newyorker.com/magazine/2017/03/06/financiers-fight-over-the-american-dream

 

But Ackman had misread the situation. He soon came to believe that Einhorn, after taking advantage of the sell-off he had prompted, then bought back his stock and completed the short, figuring that it would rise again. It looked as if Einhorn was playing a short-term game, and had no interest in convincing the world that Herbalife was going to collapse.

 

“We usually do all the work,” Ackman went on, “so I’m, like, finally, we can let David do all the work, and we’ll make a bunch of money, and everyone wins.” He sighed. “Well, it didn’t work out that way.”

 

Unbelievable that he was willing to bet $1 billion largely because he thought someone else was leading the charge....

 

 

"Government investigators have found that it was almost impossible to make money selling Herbalife products, and that more than half the company’s sales came from purchases of products by its own distributors. Hundreds of thousands of new distributors joined the network each year; after losing money, or at least not making any, eighty-nine per cent of them ended up dropping out within the same year. "

 

I have as hard of a time swallowing this now as I did then - how do you determine that the bulk of the companies' sales come from distributors and not customers, and identify that 89% of new distributors fail/quit in the first year, and identify that they used deceptive marketing schemes worthy of $200 million settlement and still avoid calling them a fraud? How does the media portray that as a victory for Herbalife?

 

I didn't understand it then and I don't understand it today.

 

Criminal charges filed today in New York in regards to bribery in business dealings in China. Trading suspended. You know what they say: It's rarely just the one roach in the kitchen.

 

Crazy that they might be brought down for bribery when it is fairly clear they were running a ponzi scheme the entire time they were being investigated. I have to feel bad for Ackman on this one.

 

[coc]

$123 million settlement and the stock is doing just fine. Personally this whole saga saddens me.

[Liberty]

https://www.cnbc.com/2020/08/31/tiktok-deal-to-sell-us-business-could-be-announced-as-soon-as-tomorrow.html

 

TikTok has chosen a bidder for its U.S., New Zealand and Australian businesses, and it could announce the deal as soon as Tuesday.

 

Microsoft, in partnership with Walmart, and Oracle are the two top contenders for the deal.

 

The sale price is expected to be in the range of $20 billion to $30 billion.