- Hedge fund puke decides that a MLM company is a fraud. (I actually agree with him about MLM companies, but I digress)
- Hedge fund puke shorts MLM company to the tune of billions.
- Hedge fund puke lobbies regulators to bust MLM company.
- Fails, so he rolls out the big guns, and Bill Ackman unloads on Herbalife with a much touted series of revalations that are really just a multi-hour rant:
Hedge fund billionaire William Ackman promised to deliver a deathblow to Herbalife from a Manhattan stage, but his long presentation on Tuesday bombed with investors and left the diet shake seller unscathed.
Herbalife CEO “Michael Johnson is a predator,” Ackman said fighting back tears as he wrapped up the second hour of the presentation while referring to his family’s American story, which started when Ackman’s great-grandfather immigrated to the U.S. from Russia. “This is a criminal enterprise.” Ackman called Herbalife a $24 billion “scam.” “The fraud is affecting more and more people,” said Ackman. “It is time to shut the company down.”
Shares of Herbalife rose steadily in the morning after Ackman started giving his talk on Herbalife’s nutritional clubs, increasing by 8% to $58.40 in the first hour of the presentation. Two hours into the talk the stock had risen by 11% to $60. That’s a little higher than the shares were changing hands for on Monday before Ackman drove down the stock by 11%, saying he would be delivering “the most important presentation that I have made in my career.” Ackman had promised in a CNBC interview on Monday that “we won’t disappoint.” Ackman’s presentation was still going on at 1:07 p.m., with the stock up by 15% to $62.22. During the presentation, Ackman suggested that Herbalife had been repurchasing shares in a material way on Tuesday. Shares of Herbalife continued to rise after the three-hour presentation ended, closing at $67.77, up 25% for the day.
………
The company, which has vigorously denied Ackman’s accusations, said on Tuesday that Ackman was trying to drive down Herbalife’s shares over a relatively short period because a “substantial portion of the bet expires on January 17, 2015,” referring to put options Ackman purchased when he restructured his short position in the company’s shares. Circumstantial evidence suggests Ackman’s put options are currently not in the money.
………
During the presentation, Ackman invoked Enron, Bernard Madoff, totalitarian regimes and even the Nazis. “The big lie is used by totalitarian regimes, and by the Nazis and by lots of people and people generally believe big lies because they are so bold that how can they possibly be false,” Ackman said. He criticized former Secretary of State Madeleine Albright for supporting Herbalife and claimed that Albright had successfully used her connections to make sure the company could continue to operate in the key China market after Ackman had attacked Herbalife’s China operations earlier this year.
Oh, yeah, and then there is those accusations of free babysitting:
“They are not selling weight loss in these clubs, they are selling business opportunities,” Ackman said at the presentation to investors in New York, adding the clubs provided free babysitting and had people working making nutrition drinks without pay.
“This is all free labor, totally illegal,” he said.
Herbalife jumped, and his short bet dropped in value as a result.
I joke about schadenfreude all the time, but this really does make me feel good.
Does that make me a bad person?