The Herbalife saga is “far from over, ” according to Ted Braun, the director of “Betting On Zero” — a documentary that chronicles hedge fund manager Bill Ackman’s billion-dollar wager against the multilevel marketing company.
“If you’re looking at the nature of his accusations — the FTC’s settlement — the court order as well as the complaint — is a resounding endorsement of everything Ackman has been saying over the last three years, ” Braun told Yahoo Finance.
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For more than three-and-a-half years, Ackman, the CEO of $12 billion hedge fund Pershing Square Capital, has been crusading against Herbalife (HLF). In late December 2012, he publicly declared that he was short $1 billion worth of Herbalife and that the stock would go to $0. His thesis centered around his belief that the company is operating as a “pyramid scheme” that targets poor people, particularly from minority populations. He said that regulators, specifically the FTC, would shut the company down.
In mid-July, Herbalife agreed to pay a $200 million settlement with the FTC and “fundamentally restructure” its business.
The FTC alleged in its complaint that most distributors make little to no money and a substantial percentage lose money. The “small minority” of distributors who receive “substantial income” do so through recruiting participants, not actual retail sales. The complaint said the company does “not offer a viable retail-based business opportunity.”
Read the full story at Finance Yahoo, by Julia La Roche
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