HLF - Herbalife

[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.

 

And criminal charges settled the same day?

 

https://www.wsj.com/articles/herbalife-nutrition-agrees-to-pay-123-million-to-settle-china-bribery-allegations-11598629429

 

Our justice system is a joke. You can get out of criminal bribes by bribing U.S. enforcement agencies with "settlements"