Well-known value and activist investor Bill Ackman launched a major attack on weight loss nutritional product company Herbalife (HLF, Financial), by declaring a big short position in the company shares from the Sohn Foundation Conference. He laid out its short case with a huge three-hour presentation.
He stated that Herbalife is not more then a pyramid scheme which ensures that more than 90% of its distributors are not making any payouts and that the business model is unsustainable. The market has responded with dumping of the Herbalife stock. Since Ackman declared his short position in Herbalife on Dec. 20, HLF stock has nose dived from $41 to approximately $26 on Dec. 24. That is almost a 37% decline in the market capitalization.
Ackman has further intensified his fight against with the company. Pershing Square has launched a dedicated website to provide the world all the information related to Herbalife. Anyone can access the website at www.FactsAboutHerbalife.com. The website provides investors and the general public all the information related to Herbalife, from the company history, to the description of the business model, distributor presentations, distributor recruiting videos, distributor lifestyle videos, third party investigative reports and all the legal and SEC filings. Basically, any information related to Herbalife which his analysts and and his legal advisers uncovered while conducting their research on the company.
Website also has the 342-page presentation for download as well as the full three-hour video with Bill and his analyst making their case for shorting Herbalife.
I have always admired Ackman as an investor and have closely followed his ideas, but thing which is most admirable about this fight is that he is transparent and has been putting all the information on the table for everyone to see. Another quality I have admired is his philanthropic efforts. While reading about this episode I came across some articles which highlighted the plight of some of the Herbalife distributors as well as information that Ackman has initiated this short not to make money but to shed light on these kind of schemes so that regulators can take action. Ackman said that any money he will make from this short position he will be donating to charity.
I am not sure what will be the end result of this fight, but the presentation is a lesson in how to go about analyzing a security and how many different hypotheses need to be explored to gain conviction on your idea. I highly recommend every budding value investor check out the three-hour video and the presentation on the website www.FactsAboutHerbalife.com and conduct a careful study of a remarkable piece of analysis put together by a very good investor.
Disclosure: I don't have any short or long position in HLF and do not plan to establish one.
He stated that Herbalife is not more then a pyramid scheme which ensures that more than 90% of its distributors are not making any payouts and that the business model is unsustainable. The market has responded with dumping of the Herbalife stock. Since Ackman declared his short position in Herbalife on Dec. 20, HLF stock has nose dived from $41 to approximately $26 on Dec. 24. That is almost a 37% decline in the market capitalization.
Ackman has further intensified his fight against with the company. Pershing Square has launched a dedicated website to provide the world all the information related to Herbalife. Anyone can access the website at www.FactsAboutHerbalife.com. The website provides investors and the general public all the information related to Herbalife, from the company history, to the description of the business model, distributor presentations, distributor recruiting videos, distributor lifestyle videos, third party investigative reports and all the legal and SEC filings. Basically, any information related to Herbalife which his analysts and and his legal advisers uncovered while conducting their research on the company.
Website also has the 342-page presentation for download as well as the full three-hour video with Bill and his analyst making their case for shorting Herbalife.
I have always admired Ackman as an investor and have closely followed his ideas, but thing which is most admirable about this fight is that he is transparent and has been putting all the information on the table for everyone to see. Another quality I have admired is his philanthropic efforts. While reading about this episode I came across some articles which highlighted the plight of some of the Herbalife distributors as well as information that Ackman has initiated this short not to make money but to shed light on these kind of schemes so that regulators can take action. Ackman said that any money he will make from this short position he will be donating to charity.
I am not sure what will be the end result of this fight, but the presentation is a lesson in how to go about analyzing a security and how many different hypotheses need to be explored to gain conviction on your idea. I highly recommend every budding value investor check out the three-hour video and the presentation on the website www.FactsAboutHerbalife.com and conduct a careful study of a remarkable piece of analysis put together by a very good investor.
Disclosure: I don't have any short or long position in HLF and do not plan to establish one.
