Bill Ackman’s $1 Billion short of Herbalife is in jeopardy after his Attempt to bring it down failed.
Bill Ackman set out to destroy diet drink marketer Herbalife, but may have ended up only embarrassing himself. The long awaited revelations, which he promised would bring down Herbalife, were not as effective as he had expected.
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On Tuesday, Ackman revealed to investors the results of his investigation into the company which he has called a pyramid scheme. He has a vested interest in bringing Herbalife down, because his firm made a $1 billion bet against Herbalife.
Speaking over a video feed from Manhattan, Ackman called Herbalife CEO Michael Johnson a predator, and the company a $24 billion scam.
He declared “This is a criminal enterprise. The fraud is affecting more and more people. It is time to shut the company down.”
Ackman may have wasted much of his time by starting with his personal story. He also came to tears at times.
His presentation, which included more than 250 slides, was based on the $50 million that his Pershing Square Capital had spent investigating Herbalife and infiltrating 240 of its health clubs.
Much of Ackman’s critique centered on these clubs. He took issue with the fact that potential Herbalife marketers must first buy the product, and pay out of their own pockets for special classes. He declared that this, “creates this tendency to want to stay, because you’re almost going to make it.”
In Ackman’s opinion, these clubs violate labor laws by coming people who work for them into thinking that they are actually in business for themselves. “It’s a tragedy because they don’t know they’re being defrauded, ” He said of Herbalife sales reps.
Mr. Ackman’s comments clearly fell on deaf ears, as Herbalife stock continued to rise during his three hour presentation, closing up 25%. This came after an 11% drop the day before, after Ackman had declared in a CNBC interview that his presentation would not disappoint and be “the most important presentation that I have made in my career.”
Herbalife’s executives were clearly not impressed by Ackman’s threats, and its CFO John DeSimone told CNBC yesterday that Ackman’s “bark is always worse than his bite.”
The company released a statement which said, “Once again, Bill Ackman has over-promised and under-delivered on his $1 billion bet against our company. After spending $50 million, two years and tens of thousands of man-hours, Bill Ackman further demonstrated today that the facts are on our side.”