Wednesday, 24 August 2016
Last updated 12 hours ago
Jul 21 2014 | 1:39pm ET
Does William Ackman finally have the goods on Herbalife, the nutritional supplements company he’s branded a pyramid scheme?
The Pershing Square Capital Management founder is set to reveal the results of his two-year investigation into the company’s nutrition clubs, which he says are a key element to continuing Herbalife’s fraud. The findings will be announced tomorrow morning on a webcast.
Kase Capital’s Witney Tilson wrote in a post on ValueWalk that Ackman “will be adding his latest nail to Herbalife’s coffin” on the webscast. Tilson, who like Ackman is shortng Herbalife, added that the presentation “should be a doozy” and is “a must-watch.”
The nutrition clubs are designed to introduce customers to Herbalife products, but Ackman calls them a “pyramid within a pyramid,” designed to recruit new distributors. There are more than 3,000 such clubs in the New York area alone.
For its part, Herbalife is not waiting for Ackman’s purported hammer to fall. On its Twitter account, the company blasts the hedge fund managers as “the worst of Wall Street,” and in an accompanying press release defends the clubs a playing “a positive role in promoting a community-based approach to health and wellness,” and arguing that “Pershing Square’s information, presentations and representations cannot be trusted.”
“Among other things, it has been widely reported that Pershing Square and its agents have concealed financial arrangements, misrepresented affiliations and orchestrated artificial ‘grassroots’ events, all in an attempt to manipulate Herbalife's stock price for Pershing Square's financial gain. Pershing Square has shown that there is no line it will not cross, stating publicly it would take this attack on Herbalife ‘to the end of the earth.’”
Pershing Square opened a $1 billion short against Herbalife a year-and-a-half ago, and has said that it expects the company to be shut down by federal regulators.