Seeking Alpha

G. Hudson

 
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  • The Mystery Of Icahn And Herbalife's AGM Delay [View article]
    See below excerpt from my article- “Herbalife Information Disputes Pyramid Allegations”

    Here is a link to my Seeking Alpha article- http://bit.ly/1d5iYx6

    Even though Herbalife didn't immediately have those numbers, I am very impressed with how quickly Herbalife's management acted by engaging Lieberman Worldwide Research, one of the top market research companies in the world, to conduct a survey to help develop a better understanding of Herbalife consumers in the U.S. as well as the actual percentage of sales to non-distributor customers. This decision has already paid huge dividends as documented by these excerpts from "Herbalife's CEO Discusses Q2 2012 Results - Earnings Call Transcript":

    Michael Johnson - Chairman and CEO: "Today, for example, we know that 20% of our U.S. volume is shipped directly from Herbalife to the end consumer who is not a distributor. And 30% to 35% of our volume in the U.S. is sold directly to consumers through nutrition clubs, so over half of our U.S. volume is going to the end consumer through these two business methods. And this doesn't include volume from our traditional person-to-person selling method."

    Michael Johnson - Chairman and CEO: "Over the past several years, a growing portion of our business has been driven by our distributors around the world moving to daily consumption business methods with long-term sustainable customers. We believe that daily consumption business methods now generate approximately 40% of our volume. With more than 36,000 non-residential nutrition clubs operated by our distributors around the world, Herbalife products and distributors are more accessible to more customers than ever before."

    Excerpt from Analyst John San Marco - Janney: "That's helpful. And then in terms of the U.S., what - I want to make sure I got my numbers right. I think Michael said that 30% to 35% of volume in the U.S. is daily consumption and then I think you stuck to the number that was about 40% of global volume is from daily consumption. Why do you think it is that the U.S. under-indexes?"

    Excerpt from Des Walsh, President of Herbalife: "So the answer is, John, because the clubs initially were adopted by our Latino group in the United States, and it was based on the success of the Latino group that then they were adopted within the general market. But that was probably about two years later, and that's why you're seeing that, by comparison, the percentage involved is lower today, but as far as future potential, we're very bullish upon the growth now that's happening in the general market."

    In addition to these direct sales to the end consumer, I believe that Herbalife has misclassified sales made to distributors that are strictly for self consumption and who don't have any down line. These distributors need to be reclassified as preferred customers. If they decide that they like Herbalife products enough to sell them and/or to recruit other distributors, they can easily become distributors by signing up online to become part of the distributor network. I personally have sent some suggestions to Herbalife on how to make this change, and I am confident that Herbalife will be able to make those changes soon.

    My conclusion is that Herbalife is not currently a pyramid or will ever be considered a pyramid here in the U.S. since per my best conservative guess, at least 60% to 75% of U.S. sales is to non-distributor customers. [(30% TO 35% "& growing" are direct sells to customers at clubs) + (20% of U.S. volume is shipped directly to non-distributor customers) + (traditional person-to-person sales to non-distributor customers) + (misclassified sales)]
    Mar 14 12:34 PM | 13 Likes Like |Link to Comment
  • Herbalife Throwing Money At Its Problems [View article]
    WHAT WE HAVE LEARNED TO EXPECT FROM ACKMAN- As each month comes to an end, Ackman has consistently released some type of information to try to depress Herbalife's share price so that he doesn't have to report as big of a loss on his Herbalife short. Anyone can go back thru the history of this beginning with his initial presentation and see that a lot of his releases are timed to help his fund report better financial results.

    If Ackman was serious about his accusations concerning Herbalife, he wouldn't be timing his releases but would present his findings as he discovered them. This is not about helping any of Herbalife's distributors, it's all about $$$$'s for Ackman's investors.
    Feb 28 12:40 PM | 9 Likes Like |Link to Comment
  • Herbalife Throwing Money At Its Problems [View article]
    Eventually Ackman will learn that you can only cry wolf for so long and with no reaction from the more intelligent HLF shareholders, he will have to face the agonizing fact of how he will be able to get out of his short position without breaking the bank.

    I noticed that Ackman is trying his usual ploy- after HLF good news - shorting more shares of HLF stock in order to control the upward momentum of HLF's share price. Here is the latest HLF short interest chart which shows that someone (my guess Ackman) has added approximately 2.7 MILLION shorts to their position-

    Settlement Date;Short Interest;Avg Daily Share Volume;Days To Cover

    2/14/2014 22,638,526 3,577,909 6.327306
    1/31/2014 20,511,785 6,264,290 3.274399
    1/15/2014 20,223,267 3,128,333 6.464551
    12/31/2013 19,942,956 3,308,950 6.026974

    This strategy will backfire too and will eventually lead to even more problems for Ackman and his investors. (NOTE: Actually it will be his investors who suffer from Ackman's obsession with Herbalife. Talk about someone using their emotions for their trading strategy.)
    Feb 28 11:50 AM | 11 Likes Like |Link to Comment
  • Ackman Could Win, So Why Risk Money On Herbalife? [View article]
    This could be the year the Cubs win the World Series too!
    Feb 14 08:03 AM | 5 Likes Like |Link to Comment
  • Herbalife Debt Deal Leaves Ackman Licking His Chops [View article]
    I think Herbalife's financing plan has Icahn's expertise written all over it. Icahn has already stated he is in this for the long run. Stiritz is taking steps to buy more of the company and to become more involved. If Ackman can't come up with anything better than he has, this game is in its final stage and will eventually punish Ackman's investors!
    Feb 4 10:34 AM | 9 Likes Like |Link to Comment
  • Canada Probing Herbalife, Eh? [View article]
    12:50p Herbalife Responds to NY Post Article Regarding Canada Probe: "The company takes it's disclosure requirements very seriously. We refer you to our public filings." (Benzinga)


    1:25p UPDATE: Herbalife Says "We are unaware of any investigation and have not been contacted. Canadian sales represent less than 1 percent of sales." (Benzinga)
    Jan 28 02:25 PM | 5 Likes Like |Link to Comment
  • U.S. Senator Offers Herbalife Reality Check As Ackman Reloads [View article]
    If Ackman's quarterbacking the situation- then why did Senator Markey not mention Ackman in his letter->REASON-> Markety doesn't want to be associated with Ackman & manipulating the stock market
    Jan 23 01:05 PM | 5 Likes Like |Link to Comment
  • U.S. Senator Offers Herbalife Reality Check As Ackman Reloads [View article]
    QUESTIONS FOR MARKEY:

    So why didn't Markey say anything about that meeting with Ackman and his staffers in his letter????

    Who provided him OR HIS STAFFERS with the questions for Herbalife in his letter???


    Comments (253)



    Per New York Times article: http://nyti.ms/1dScLFZ

    "Mr. Ackman met with members of Mr. Markey’s staff last fall, but he has not met with the senator, a spokeswoman for Mr. Markey said."

    MY COMMENT: Last Fall - Hmmmmmmmmmmmmm -> wasn't that just a few months ago???? What a coincidence!!!!! Staffers meet with Ackman-> Staffers ask Ackman type questions of Herbalife-> Hmmmmmmm


    NOTE: These are detailed questions that seem to be those questions that Bill Ackman might request.

    Also in Mr. Markey's letter he references one family that lost $130,000 including their entire 401(K) Soooooooo-> Was the money lost in their 401(K) invested in Herbalife stock???

    Since Mr. Markey is asking for openness, it would be good for him to provide all of his connections, including any political contributions from Ackman too.
    Jan 23 12:31 PM | 14 Likes Like |Link to Comment
  • Could Herbalife Wind Up As A Total Loss? [View article]
    For those shorts complaining about lack of information concerning Herbalife's China business, it only takes a few seconds to find this information. Here are some excerpts from Herbalife's 2012 Annual Report (as well as a link to that report)-

    http://bit.ly/LFITjP

    From page 4 of report-

    "In China, in order to comply with local laws and regulations, we sell our
    products through, sales representatives, sales officers, independent service providers and in retail stores."

    From bottom page 6 & top page 7-

    "In China, due to local regulations, our sales are conducted through Company operated
    retail stores, sales representatives, sales officers and independent service providers; in the areas where we have a direct selling license, our representatives, officers and independent service providers can sell Herbalife product outside of the retail establishments."

    From page 8-

    "Under the regulations published by the Chinese Government, direct selling companies are limited to the payment of gross compensation to direct sellers of up to a maximum 30% of the revenue they generate through their own sales of products to consumers. We have incurred and will continue to incur substantial ongoing costs relating to the inclusion in the China business model of Company operated retail stores, sales representatives, sales officers and independent service providers and Company provided training and certification procedures for sales personnel, features not common elsewhere in our traditional business model."

    From page 32-

    In 2005, China published regulations governing direct selling and prohibiting pyramid promotional schemes, and a number of administrative methods and proclamations were issued in 2005 and in 2006. These regulations require us to use a business model different from that which we offer in other markets. To allow us to operate under these regulations, we have created and introduced a model specifically for China. In China, we have Company-operated retail stores that can directly serve customers and preferred customers. We also have sales representatives who are permitted by the terms of our direct selling licenses to sell away from fixed retail locations in the provinces of Jiangsu, Guangdong, Shandong, Zhejiang, Guizhou, Beijing, Fujian, Sichuan,Hubei, Shanxi, Shanghai, Jiangxi, Liaoning, Jilin, Henan, Chongqing, Hebi, Shaanxi, Tianjin, Heilongjiang, Hunan, Guangxi, Hainan, and Anhui. We have also engaged independent service providers that meet both the requirements to operate their own business under Chinese law as well as the conditions set forth by Herbalife to sell products and provide services to Herbalife customers. These features are not common to the business model we employ elsewhere in the world, and based on the direct selling licenses we have received and the terms of those which we hope to receive in the future to conduct a direct selling enterprise in China, our business model in China will continue in some part to incorporate such features. The direct selling regulations require us to apply for various approvals to conduct a direct selling enterprise in China. The process for obtaining the necessary licenses to conduct a direct selling business is protracted and cumbersome and involves multiple layers of Chinese governmental authorities"

    There is even more information beyond this but thought this would be enough for people to understand that Herbalife's China business is more like a regular retail store operation.
    Jan 22 09:37 AM | 4 Likes Like |Link to Comment
  • Could Herbalife Wind Up As A Total Loss? [View article]
    NEWS FROM ANOTHER SHORT WHO LISTENED TO ACKMAN:(short lost $75,000 shorting Herbalife)

    Herbalife short-seller lawsuit against Icahn dismissed • 3:47 PM

    Daniel Ravicher had accused Carl Icahn and three large banks of helping Herbalife (HLF +3.8%) perpetuate a pyramid scheme after losing more than $75K trying to piggyback on Bill Ackman's short thesis.
    The judge ruled Ravicher could win only if he could show his purchase of put options imposed a duty on Icahn and the banks not to help Herbalife. "That is not only a counter-intuitive proposition, it violates a principle (volenti non fit injuria) that one who knowingly and voluntarily risks danger cannot recover for the resulting injury."

    MY THOUGHT: In my opinion, he should have sued ACKMAN
    Jan 21 03:52 PM | 7 Likes Like |Link to Comment
  • Could Herbalife Wind Up As A Total Loss? [View article]
    Be careful -> Quoth doesn't like investors to present facts in response to his articles. Hopefully he won't delete your comment but there is a high probability he will have my comment deleted.
    Jan 21 11:57 AM | 8 Likes Like |Link to Comment
  • Could Herbalife Wind Up As A Total Loss? [View article]
    Ask Herb how his bashing of another MLM over a ten year period turned out-

    PPD’s share price was at $32 in November 1997 when Herb Greenberg started trashing the stock and at $20 in July 2002 when Melissa Davis started trashing the stock and PPD was sold for $66.50 per share in 2011, I would say it should be fairly obvious to anyone as to who were the ones who didn’t have a clue what they were talking about as to the overall value of PPD’s business.

    Here is a short recap with excerpts of some Herbs & Ms. Davis articles-

    I watched Herb do this same thing but only worse to another MLM called Prepaid Legal Service (PPD stock symbol) over 10 years ago. He led an attack on that company that lasted several years. Here are some excerpts from a Fortune Magazine November 24, 1997 article with this title –

    LAW REVIEW: WILL PRE-PAID KEEP GROWING? A COMPANY'S HMO-STYLE APPROACH TO LEGAL SERVICES HAS WON IT PLENTY OF FANS--AND A SOARING STOCK PRICE. BUT SHORTSELLERS SAY THE NUMBERS DON'T ADD UP.

    “Wall Street is so impressed that the stock has tripled over the past 12 months to a recent high of $32”

    “But there may be a hitch: a cadre of short sellers don't think Pre-Paid earnings are all they're cracked up to be.”The accounting is unrealistic," charges Robert Olstein of Olstein's Financial Alert Fund in Purchase, N.Y., who asserts that Pre-Paid is effectively overstating its earnings because of the way it accounts for the commissions it pays its sales force. And therein lies our story. “

    Herb continued with his quest to help short sellers to knock PPD share price down with many articles including this one on 2/16/99 titled-

    Has Pre-Paid Legal's Core Growth Started to Slow?

    “The short-sellers think it was an act of desperation to counter the slowing growth of its core biz.”

    Herb likes to quote and side with the short sellers even to the point a person reading his article might think he’s either short or in bed with the shorts. Herb was so intent on attacking Prepaid Legal that he even helped Melissa Davis, who was from the same town as PPD is headquartered and who had been writing negative articles about Prepaid Legal at the Daily Oklahoman, get a job at TheStreet.com. Seems like an aggressive move by Herb for someone who is supposed to be an independent reporter but I guess it worked out for him because she immediately began writing negative stories about PPD for TheStreet.com.

    The headline for one of Melissa Davis’s first articles on 7/4/02 says it all about how independent her reporting was going to be and the following two excerpts that summarizes the pressure shorts and these supposed independent writers put on the company-

    Pre-Paid Legal: Not for the Faint of Heart

    “Short-sellers scoff. Not only is Pre-Paid's growth slowing, they say, but the company's future is threatened by a wave of lawsuits filed by its customers and sales force. They accuse Pre-Paid of being an illegal pyramid scheme that's rife with con artists. “

    “Both sides continue to do battle. And the thinly traded stock remains vulnerable to price swings. For now, it remains almost smack in the middle of its record highs and lows -- poised for either a massive short squeeze or total obliteration, depending on whom you ask.”

    NOTE: At the time the above article was written, PPD’s share price was right at $20 per share.

    So now you are probably wondering who was right and what happened to Prepaid Legal Services over the long run. Yes, shares of PPD were highly volatile and shares were run all the way down to as low as $10 per share during this difficult time when the company and its shareholders were under attack but for those who were willing to endure the short seller attacks as well as the attacks by supposed independent investment reporters like Herb Greenberg and Melissa Davis there was goo news. Apparently an independent investment group, MidOcean, in January of 2011 bought Prepaid Legal Services for $650 MILLION as reported by M. Scott Carter per 1/31/11 The Journal Record article. Here is an excerpt from that article-

    "Pre-Paid said MidOcean is purchasing all the outstanding shares of Pre-Paid for $66.50 per share"

    So if you are asking who was right about the stock- Prepaid Legal's stock had just tripled to $32 per share when he started bashing the stock & it still doubled during his continued bashing over a 10 year period-> that should answer most investors question as to who was right about that investment
    Jan 21 11:49 AM | 5 Likes Like |Link to Comment
  • Could Herbalife Wind Up As A Total Loss? [View article]
    I wouldn't expect you to be able to figure it out!
    Jan 21 10:33 AM | 7 Likes Like |Link to Comment
  • Could Herbalife Wind Up As A Total Loss? [View article]
    NOVEMBER is the key-> when he got out of JC PENNEY -> it didn't take him very long to get it done -> There were a few announcements giving him fodder to change-> he resigned from the board-> shortly thereafter he sold out of JC PENNEY-> Herbalife is a much tougher position to unwind -> He already covered a good portion of his position -> switching them to puts at who knows what level just so he could make a claim that he could still make as much money-> His December 2013 letter hinted that he had already made more changes -> " as now structured, even greater asymmetric payoff than before because of the stock price’s substantial rise."

    MY QUESTION TO YOU: If ACKMAN was going to cover HLF - do you think he would make a big announcement that he was covering OR would he be sly -> making everybody think he was still negative while sneaking out of his trade???
    Jan 21 10:12 AM | 5 Likes Like |Link to Comment
  • Could Herbalife Wind Up As A Total Loss? [View article]
    Quoth,

    You picked the wrong ACKMAN investment idea-> it's JC Penney that's going to ZERO. Give him credit for that one. Herbalife is on its way to $100. (I believe Ackman is using this time to cover -> QUESTION: How long has it been since we actually have a quote from Ackman or a spokes person for his company provided directly to a news source about Herbalife?

    NOTE: All recent stories are attributed to investors in Ackman's funds or from an investor letter that supposedly isn't for public distribution but reporters always pick it up. However a lot of them are just reporters (who knows their connection to Ackman) conjecturing and then saying- Ackman's company didn't respond to their inquiry)
    Jan 21 09:16 AM | 10 Likes Like |Link to Comment
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