Global nutrition company Herbalife issued an official response to comments made the previous day by activist investor Bill Ackman regarding its business model, claiming they came as no surprise and were only aimed at lowering the company’s share price.
In an interview on CNBC’s Squawk Box program, Ackman linked the company to Bernie Madoff, a former stockbroker convicted of fraud, and said he is “doing God’s work on Herbalife.”
Initially, Ackman’s remarks on the weight management company sent the stock into yet another fall, continuing the selloff for the third day in a row. However, the share price rallied post noon, and to everyone’s surprise, closed trading up over 4% to $31.72. Part of this must be attributed to Herbalife’s retort to Bill Ackman’s continuous bashing, website Bidness Etc (BE) said.
In the press release, Herbalife called the activist investor “entirely predictable, ” pointing to his put options on the troubled company that are expiring next week. It said Mr. Ackman is “off on yet another tirade of misrepresentations, the sole purpose of which is to drive down our share price”, the website said.
Herbalife further claimed the facts of its business are “inconvenient” for the founder of Pershing Square Capital Management, who “clearly has no interest” in learning more about the company’s business practices. The global nutrition company said Mr. Ackman’s lack of interest was demonstrated in his team’s last-minute cancellation of an important meeting with Herbalife’s chief compliance offer Pamela Jones Harbour, which the hedge fund itself requested, BE said.
In response, Ackman, CEO of the $18 billion hedge fund Pershing Square Capital, issued a statement saying that there was no cancellation, according to Business Insider. “Rather than speaking to its deteriorating business fundamentals, Herbalife appears to be attempting to distract investors from the facts by claiming — falsely — that we canceled a meeting, ” he said.
According to Pershing Square, the initial meeting between its legal counsel David Klafter and Herbalife was postponed, not cancelled, Business Insider said.
For more than two years, the activist investor has been publicly campaigning against the global nutrition company, going to the extent of calling its stocks “worthless”, BE said.
The activist investor first shorted Herbalife stock back in May 2012, but later revealed his $1 billion bet on the stock in December. That’s when he gave a 342-slide presentation, publicly claiming that the company was running a superbly-managed “pyramid scheme.” Mr. Ackman claims that Herbalife targets the underprivileged population, particularly the Hispanic demographic, the website said.
His investment thesis calls upon regulatory authorities, especially the FTC, which he is pressing obstinately to shut the company down. The Commission initiated its probe into Herbalife’s business model in March last year, but the company hopes to be vindicated once the investigation concludes, BE said.