[NGR] Ackman's presentation on Herbalife: “This isn’t even a pyramid scheme, it’s a pancake scheme.”

http://blogs.wsj.com/corporate-inte...fe-and-what-the-company-needs-to-do-about-it/

Thought this was interesting LAG-related news. Ackman is the head of Pershing Square Capital Management, an activist hedge fund. I know that there have been many rumors and discussions of this in the past, but seems people are digging a bit deeper now.

Pot meet Kettle.

This thread should probably be marked NGR.

Top tickers trending
$HLF: Herbalife (US:HLF) is not a stock that usually generates a lot of buzz, but it quickly grabbed the spotlight Wednesday on reports that famed hedge-fund manager Bill Ackman of Pershing Square is shorting it.

http://articles.marketwatch.com/2012-12-19/markets/35899929_1_herbalife-markel-corp-facebook

Stock got killed these past couple of days. From around $42 to $34 now.
Ackman even said that Herbalife might be the ones buying shares to keep the stock barely afloat.

FULL DISCLOSURE:
I am not an owner of Herbalife stocks or options, I am not an employee of Herbalife, I am not even an Herbalife customer. I am however, the person who introduced Herbalife to the LA Galaxy and to AEG and am responsible for turning Herbalife's interest in a soccer sponsorship (in something other than MLS) into a partnership with AEG and the LA Galaxy and I do think it is fair to offer you Herbalife's response.
-Steve







Herbalife Statement in Response to Ackman Presentation

LOS ANGELES--(BUSINESS WIRE)-- The following is a statement from Herbalife in response to the Ackman presentation. Today's presentation was a malicious attack on Herbalife's business model based largely on outdated, distorted and inaccurate information. Herbalife operates with the highest ethical and quality standards, and our management and our board are constantly reviewing our business practices and products. Herbalife also hires independent, outside experts to ensure our operations are in full compliance with laws and regulations. Herbalife is not an illegal pyramid scheme.
About Herbalife Ltd.
Herbalife Ltd. (NYSE:HLF) is a global nutrition company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle. Herbalife products are sold in more than 80 countries to and through a network of independent distributors. The company supports the Herbalife Family Foundation and its Casa Herbalife program to help bring good nutrition to children. Herbalife's website contains information about Herbalife, including financial and other information for investors at http://ir.Herbalife.com. The company encourages investors to visit its website from time to time, as information is updated and new information is posted.

Herbalife Ltd.
Media Contact:
Barbara Henderson
SVP, Worldwide Corp. Comm.
213-745-0517
or
Investor Contact:
Amy Greene
VP, Investor Relations
213-745-0504
Source: Herbalife Ltd.

Mmmmmm...pancakes...

*guy who equates investing in businesses with stealing from investors*

Herbalife is nothing more than a pyramid scheme. I was tricked into it back in my early 20s. Their business model is a pyramid, their meetings resemble that of a religous healing conference. However, the same model is being used with AEG which we all know, sponsors Manchester United.

Say what??

You mean AIG...
Right?

Was there actually a new uniform/club sponsor deal signed? I know they were working on it, but I don't recall whether it was finalized. If so, was there an out clause for this kind of thing (e.g., legal trouble or financial disruption)? You've got to believe there would be, which would really minimize AEG and the Galaxy's exposure. It just makes the financial valuation of the team more dicey for purposes of a potential sale if the uniform sponsorship deal has to be discounted for this kind of risk.

So this guys shorts the stock, and THEN publishes all of this? That's as big of a scam as the MLM stuff is...

AIG stopped sponsoring Man U in May 2010. AON is their principal/shirt sponsor now. Mister Potato also sponsors Man U. It's a potato chip scheme (or crisps as they say in the UK).

The guy is donating all profits from the shorting to charity.

The presentation in full for those interested in how this was structured.

http://factsaboutherbalife.com/wp-content/uploads/2012/12/Who-wants-to-be-a-Millionaire.pdf

So I read through the whole presentation (the things I do for the Galaxy).

The sad thing is how inured we've become to this. It's hard to watch late-night TV or go on the internet without seeing "get rich" schemes that are just cynical ways of taking advantage of the poor and uneducated. And this stuff survives because the people who get the short end of the deal aren't sophisticated enough to do something about it (which is why they get sucked in in the first place). And from society's point of view, somebody losing $1,000 or $2,000 just doesn't generate attention in the way a Madoff does.

My work is in a finance-related area which can make you cynical pretty fast, so I never really thought much about the sponsorship. But when you do think about it, what the Galaxy is doing is giving a veneer of respectability to Herbalife and that's not something we should be proud of.

Agreed on all counts.

I read through a good chunk of it and whilst it's fairly easy to cherry pick a few statistics to make almost anything look bad, they really raise some fundamental points about the business model. I work in international business and have NEVER heard of Herbalife outside of their relationship with the Galaxy does raise the eyebrow a touch. Not to say I know every company and their model, but I fancy I have a fairly good handle on things

I wouldn't be surprised if the Galaxy marketing team aren't scrambling right now and it also wouldn't surprise me if there aren't a number of strong companies lined up to provide sponsorship. When these things collapse, they do so rapidly.

On the flip side to the Ackman charges, the SEC investigated the pyramid scheme angle in 2008 and again in 2012 with no charges bought, per this article and other sources.

http://seekingalpha.com/article/107...alife-arguments-against-ackman-s-short-thesis

It should also be noted that Ackman was a staunch defender of J. Ezra Merkin who was heaviliy implicated in the Madoff scheme so it may be wise to take his personal judgement with a pinch of salt.


In other news I got a holiday card from the Galaxy today, which was nice.

I apologize, I had AIG and AON mixed together. I do mean AON.

AON is hardly a pyramid scheme. Ii is a licensed and regulated insurance brokerage firm.

That is a very impressive presentation. It's hard from that to conclude anything other then that herbalife is a total scam. I can't wait to see the herbalife response in early January. They are working this Christmas, that's for sure.

Been doing insurance for 12 years, check them out. IMO, pyramids are a business model, its not a scheme, it's only a scheme if you're dumb enough to get tricked into it as I have many years back. Obviosly, big companies like AON are not going to put their name, but most subsidiaries will lead to them. Try posting a resume on any job search websites, you will get an email telling you that you have an oportunity to be your own boss, obviously it's not going to be AON that contacts you, but do research further into the company that contacts you, it will lead to them.

Pyramid schemes are based on selling their own products to individuals whereas Aon provide services primarily to organizations. Any 'products' that are purchased using their services are typically insurance contracts provided by licensed insurance companies.

Aon are a highly reputable and extremely sophisticated company and about as far from a shady pyramid scheme as you can get.

Being your own boss in that industry is about managing your own portfolio of clients not managing a team who manages a team who manages a team and so forth. Commissions earned by Aon employees are then used to provide services and do not go into the pocket of the broker (who will be reimbursed primarily through salary and bonus, again the direct opposite of a pyramid where income is earned based on weight of sales alone).

My two cents, I'd be interested in how Aon is doing what Herbalife is accused of doing (which for the record will be fairly quiet until the week of Jan 7).

Are we sure about this?

If you work for a tied agency, then your income is based on commissions (similar I would suggest to high street brokers who are looking to place contracts with individuals but have no products of their own) but my understanding of how Aon do business (they are a competitor of mine in their consulting arm) is that they provide services to corporations and commissions are paid back to Aon directly.

I just don't get the analogy to Herbalife at all.


EDIT: Even if commissions were paid across directly, I still don't see how it is a pyramid structure unless you're saying that as you get more senior the employee in the hierarchy, the fewer people there are in which case every business is pretty much a pyramid.