"There are audit-type questions, something that two accountants might have a spirited discussion about at a cocktail party, but nothing that seems material," DA Davidson's Tim Ramey says, regarding a letter Bill Ackman's Pershing Square sent to Herbalife's (HLF -1.8%) auditor PwC.
"If we are correct that HLF is a pyramid scheme and PwC fails to accurately inform investors of this risk, PwC may incur substantial liabilities in the event of the Company's failure," Ackman says In the letter (dated August 29).
Pershing Square raises a whole host of questions over 52 pages including: Whether HLF accounts for wholesale commissions as an offset to revenue, whether the company improperly classifies unremmitted earnings as "permanently reinvested," and whether the company's Venezuelan assets are overstated. (full letter)
Here's HLF commenting: "As Mr. Ackman continues to lose his investors' money on a reckless $1B bet, he has become increasingly desperate."