Seeking Alpha

Herbalife controversy rages as stock marches higher

  • SunTrust Robinson Humphrey's Michael Swartz is now more comfortable with his Buy recommendation on shares of Herbalife (HLF) following Monday's re-audit news (see here and here).
  • "Considering PwC's intensive seven-month scrubbing-of-the-books in the face of heightened media/public scrutiny, it could serve as a nail in the coffin for the bear case," Swartz says, adding that although he is "uncertain as to the ultimate size or timing," HLF probably "has flexibility for a buyback in upwards of $1.5B, which could add $1+ to annualized EPS." Price target lifted to $85.
  • Meanwhile, some commentators were quick to note that the re-audit had little to do with the bear case in the first place. Here's Herb Greenberg: "Let's not forget, the role of the auditor is to determine whether the numbers are audited in accordance with GAAP, not to weigh in on the [pyramid scheme] controversy."
  • Similarly, here's Jim Cramer: "[I'm] just stating, frankly, the obvious — that the audit wasn't about Ponzi schemes."
  • HLF +1.8% premarket
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Comments (44)
  • G. Hudson
    , contributor
    Comments (296) | Send Message
     
    Comment: " it could serve as a nail in the coffin for the bear case"

     

    MY THOUGHTS- "there are probably even more nails to come"
    17 Dec 2013, 09:07 AM Reply Like
  • Yteeld
    , contributor
    Comments (1140) | Send Message
     
    G. Hudson, the shorts are so consumed with being correct that they are willing to lose big time...................

     

    Matt and Raven are basically just throwing anything against the wall and hoping something anything sticks...................

     

    They have broken every rule of investing in their quest to topple HLF.
    17 Dec 2013, 09:28 AM Reply Like
  • Quoth the Raven
    , contributor
    Comments (2073) | Send Message
     
    "Throwing anything against the wall" - HILARIOUS.

     

    Yeah, anything - you know, just the entire fundamental structure on the which the company in question is based on. Anyway, where are these "rules of investing" you speak of?

     

    These are the rules that I play by -

     

    http://seekingalpha.co...

     

    - you can choose to use whatever ones you want.
    17 Dec 2013, 11:29 AM Reply Like
  • Yteeld
    , contributor
    Comments (1140) | Send Message
     
    The rule of cutting your losses...................

     

    It's a simple rule. Read it real slow and it will sink in..............

     

    Have you forgotten your prediction that Ackman will drop the hammer in his Robin Hood presentation. Now that was hilarious................ yet it was the statement of someone who is lost.

     

    Your advice and accompanying analysis has been nothing but wrong and it has cost anyone that followed it lots of capital.........

     

    You are hell bent on being correct and it only shows how emotional you are about this.....................
    17 Dec 2013, 01:46 PM Reply Like
  • Akmanscam
    , contributor
    Comments (2126) | Send Message
     
    I doubt if Raven is an investor. If he was and his position on HLF is any indication of his ability to trade, his trading account would be blown up by now and he would have nothing to trade with.
    18 Dec 2013, 12:54 PM Reply Like
  • powershake
    , contributor
    Comments (1375) | Send Message
     
    I agree, QTR lost everything - if he had taken his own advice!

     

    He just keeps on saying he is short
    He is a paid shill
    19 Dec 2013, 04:06 PM Reply Like
  • David Steadson
    , contributor
    Comments (346) | Send Message
     
    Maybe Ackman goes by the nickname "The Raven"? Would kind of suit him ...
    20 Dec 2013, 10:52 AM Reply Like
  • Kay Herbert
    , contributor
    Comments (910) | Send Message
     
    Looking to add to my short position if it moves higher.
    17 Dec 2013, 09:38 AM Reply Like
  • herbs4mike
    , contributor
    Comments (2070) | Send Message
     
    have you added yet?
    20 Dec 2013, 12:23 PM Reply Like
  • Kay Herbert
    , contributor
    Comments (910) | Send Message
     
    no
    20 Dec 2013, 12:53 PM Reply Like
  • Dampflok
    , contributor
    Comments (867) | Send Message
     
    Same here, great opportunity.
    17 Dec 2013, 09:49 AM Reply Like
  • Quoth the Raven
    , contributor
    Comments (2073) | Send Message
     
    Company is a pyramid scheme. It makes money from recruiting, not sales. Nothing PwC or Carl Icahn says about HLF can change that. The fundamentals will drive the outcome here.
    17 Dec 2013, 10:41 AM Reply Like
  • David Steadson
    , contributor
    Comments (346) | Send Message
     
    Hey Quoth,

     

    Quick question. How much money does Herbalife make if they recruit a million people but nobody buys any products?

     

    A round figure will do.
    17 Dec 2013, 11:28 AM Reply Like
  • Quoth the Raven
    , contributor
    Comments (2073) | Send Message
     
    Recruits have to buy products, so that question is null, void, and useless.

     

    But to entertain you - without counting commissions and from a crude calculation, at a minimum $59 starter pack each, Herbalife would make roughly $59 million - or to give you a nice round figure, $60 million.

     

    If half of those recruits spent the $3,000 for the insta-boost up to Supervisor, Herbalife would make roughly $1.529 billion.

     

    Thanks for asking.
    17 Dec 2013, 11:41 AM Reply Like
  • just2look
    , contributor
    Comments (1355) | Send Message
     
    qtr: "But to entertain you - without counting commissions and from a crude calculation, at a minimum $59 starter pack each, Herbalife would make roughly $59 million - or to give you a nice round figure, $60 million."

     

    Are you saying/implying that distributor commissions are earned on IBP purchases? If not, why did you mention "without counting commissions"?
    17 Dec 2013, 11:56 AM Reply Like
  • Jeffjacobjames
    , contributor
    Comments (621) | Send Message
     
    Fact is If a recruit does not sell, you get nothing! Why do you spread mis-information?
    17 Dec 2013, 12:22 PM Reply Like
  • David Steadson
    , contributor
    Comments (346) | Send Message
     
    You said they make money from recruiting, not sales, and then in response to my question you only calculated revenue from product sales.

     

    So, I ask again. Please answer the question.

     

    Qouth, how much money does Herbalife make if they recruit a million people but nobody buys any products?
    17 Dec 2013, 03:39 PM Reply Like
  • herbs4mike
    , contributor
    Comments (2070) | Send Message
     
    yep, but then after nobody sells the products as you say raven and they refund how much does Herbalife have to give back..... 60 million. and then 1.529 Billion on product. Nobody gets paid as a distributor. So all distributors quit, and Herbalife is gone. Doesn't that work out nicely. Now for reality..... 34 years later. We Are Still Here, Bigger, Better, and Stronger than ever.
    20 Dec 2013, 12:25 PM Reply Like
  • Dampflok
    , contributor
    Comments (867) | Send Message
     
    j2l, you can intentionally misspell my handle all you want, fact is that my risk is minimal. Compared to my 2013 trading income the loss on HLF is so small that I don't even think of taking a tax loss. You however, in your boasting self assured smugness probably stand to lose a 6 figure income once Hlf is found to be a fraud and a scam, never mind the reputational loss in your community. Thats why you Hlf supporters are kicking and screaming all over the place.
    17 Dec 2013, 10:21 AM Reply Like
  • sacathanas
    , contributor
    Comments (1749) | Send Message
     
    Ha. I see very little kicking and screaming, just a lot of repeating what we've been saying for a year (or longer), with each day bringing more and more confirmation of our position.
    17 Dec 2013, 10:53 AM Reply Like
  • buyitcheap
    , contributor
    Comments (1891) | Send Message
     
    Isn't it the FTC's job to determine whether it's a pyramid scam, not the SEC's? The auditor is saying that the financials are "fairly stated in all material respects" but you could say the same about an offshore gambling operation. If the books are substantially accurate, you get a clean opinion.
    17 Dec 2013, 12:10 PM Reply Like
  • just2look
    , contributor
    Comments (1355) | Send Message
     
    buyitcheap: "Isn't it the FTC's job to determine whether it's a pyramid scam, not the SEC's? The auditor is saying that the financials are "fairly stated in all material respects" but you could say the same about an offshore gambling operation. If the books are substantially accurate, you get a clean opinion."

     

    Ackman sent PwC a 52 page letter last August, outlining all the "issues and concerns" he has regarding Herbalife. After 4 months of investigating those "issues and concerns" ... PwC dismissed them.

     

    One more Ackman "thesis" bites the dust.
    17 Dec 2013, 12:23 PM Reply Like
  • Ray Lopez
    , contributor
    Comments (1526) | Send Message
     
    MLM = Multi-Level Marketing is legal. It was not legal a generation ago (2013-25 = 1988 and before) but the law has progressed.

     

    Avon, Herbalife, Primerica, Mary Kay, and others (http://bit.ly/19aOvxR) use MLM as their model.

     

    It's legal folks. Get over it. And cover your shorts.

     

    PS--I have no position in this company.
    17 Dec 2013, 12:14 PM Reply Like
  • David Steadson
    , contributor
    Comments (346) | Send Message
     
    Ray, MLM has always been legal. The biggest case was in 1979 with the judgement in FTC vs Amway confirming it's legality
    17 Dec 2013, 03:43 PM Reply Like
  • Akmanscam
    , contributor
    Comments (2126) | Send Message
     
    In the 1950s, Franchising was considered an illegal pyramid scheme too. Look at how many millions of dollars and ease of buying products has come as a result of that. And it is now acceptable.

     

    MLM is also legal. The fact that some people still refer to it as a pyramid just shows how ignorant and uneducated these people are
    18 Dec 2013, 12:58 PM Reply Like
  • KJP712
    , contributor
    Comments (449) | Send Message
     
    By the time they want to throw in the towel,that will be gone,too.
    17 Dec 2013, 12:14 PM Reply Like
  • G. Hudson
    , contributor
    Comments (296) | Send Message
     
    Ackman finally figured out JC Penney but it took him a little while and a lot of his client's money NOW he's a little slow on Herbalife but you can bet your bottom dollar that he won't clue in other shorts while he tries to find a way to the exit.
    17 Dec 2013, 01:07 PM Reply Like
  • Tom Shaughnessy
    , contributor
    Comments (1125) | Send Message
     
    This may be a time where I am in 100% agreement with Herb Greenberg
    17 Dec 2013, 01:34 PM Reply Like
  • powershake
    , contributor
    Comments (1375) | Send Message
     
    Tom,

     

    How about your wallet - is money with the shorts as Greenberg promotes?
    He has been wrong on HLF since day one on HLF, are you a tool?

     

    PwC has CLEARED HLF of pyramid Scheme allegations!!!
    Thanks to Ackman's pressure, PwC had to completely investigate HLF and HLF came out squeaky CLEAN
    http://stks.co/h03bS
    17 Dec 2013, 02:56 PM Reply Like
  • Quoth the Raven
    , contributor
    Comments (2073) | Send Message
     
    Tom's wallet is his business. Have another powershake.
    17 Dec 2013, 04:02 PM Reply Like
  • Tom Shaughnessy
    , contributor
    Comments (1125) | Send Message
     
    ^ +100
    17 Dec 2013, 04:12 PM Reply Like
  • Yteeld
    , contributor
    Comments (1140) | Send Message
     
    Spoken by someone whose advice has cost many people their hard earned money......with no regrets though he continues
    19 Dec 2013, 12:41 PM Reply Like
  • CrimeBustersNow
    , contributor
    Comments (2172) | Send Message
     
    NOT POSTED "Dampflok" writes to Herbalife distributors and supporters…… "You however, in your boasting self assured smugness probably stand to lose a 6 figure income once Hlf is found to be a fraud and a scam, never mind the reputational loss in your community. Thats why you Hlf supporters are kicking and screaming all over the place.”
    ****
    Dead on “Dampflok:” However, right now they are “kicking screaming” (albeit in fear of exposure)" but “laughing all the way to the bank.”

     

    Got to hand it to the fraud artists…. it is not as though we weren't warned.... Before the turn of the century MLM pyramid scammers publicly declared their mantra over and over….

     

    “This will be the “Business Model” of the new millennium.”

     

    …. Just did not believe U.S. authority would stand by and through regulatory non-enforcement, sell the U.S. and the world down the same river as Albania to pyramid fraud.

     

    David Thornton
    Concerned Citizen – No position in any stock: Simply doing what WE can to expose and prevent fraud.
    17 Dec 2013, 05:28 PM Reply Like
  • okdeason
    , contributor
    Comment (1) | Send Message
     
    Look at it this way, do you want to be right or happy. I think Ackman may be right (maybe not), but I doubt he is happy. Icahn may be wrong, but he is happy.

     

    Everyone thought Bad Bad Leroy Brown, was the baddest dude in the whole damn town, until Jim showed up. This might be a Ackman and Icahn story for the ages. My thought is stay out of the tunnel, too much to risk, not enough to gain, at this point.

     

    This story is going to have an unhappy ending.....like two rednecks drinking...and the redneck who dies...last words were....
    "hey bubba, watch this". !!
    17 Dec 2013, 05:41 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4071) | Send Message
     
    I don't short Carl Icahn. Easier ways to make a living.
    17 Dec 2013, 09:27 PM Reply Like
  • CrimeBustersNow
    , contributor
    Comments (2172) | Send Message
     
    Still presenting loaded questions David Steadson asks
    “….Qouth, how much money does Herbalife make if they recruit a million people but nobody buys any products?”
    ******
    The answer David, of course - 0. Sounds like an Abbot & Costello skit. But with a product changing hands it all depends on the meaning of “Buy.”

     

    The issue of product and “sales” and illegal pyramid schemes was sorted out before a Judge of the Superior Court in the failed 10mil S.L.A.P.P. I fought undefended against a 24 lawyer prestigious law firm in 2006. Again, every lawyer I canvassed, private or government, friendly or adverse agreed I would lose: Didn’t happen.

     

    So, I believe I have earned the right to speak with a degree of authority re: pyramid/Ponzi schemes.

     

    The argument resolved is this. A promoter wants to “sell” a product. Take something common – vacuum cleaners. He proposes to his first recruiter “salesman” that he will “sell” him a vacuum cleaner for use as a demonstrator and for his personal use for $1200, and if in turn, he “sells” only two V/Cs to two others, who in turn sell 2, when 8 “sales” are completed he will earn $7000 dollars.

     

    So if the recruiter paid the organizer $1200 in exchange for the vacuum; was it sold to him? Was it a bona fide “sale” of a bona fide product? It would seem so: It’s a simple act of a V/C in exchange for $1200.

     

    But this is where the transaction and the compensation run afoul of pyramid laws and why this particular promoter was finally arrested.

     

    His first “salesperson” (recruit) purchased the V/C from the V/C company for $1200 and was only required to “sell two” and motivate his “sales team to do the same in a “cookie cutter” fashion.

     

    How was his “compensation” arrived at? Well, he received the V/C he purchased and was given 100% of his $1200 purchase price back. He then received 100% of the two sales and those he sold the V/Cs to, also kept their V/Cs… but wait… like the TV infomercials, as a bonus he received $6000 totaling $9600 from the people represented in the eight positions at bottom of the “sales” ladder. He then, by contract gives the promoter $2600 leaving him $7000 – minus of course his original $1200 he paid to be at the top of the sales board. He repeats the cycle. Any other “sales person” can “pass him” along the way”

     

    Question: How can a corporation pay a salesperson, distributor, recruiter, whatever label you wish, 100% of three “sales,”(his included) a $6000 bonus - $2600 with he and his two new “customers” who then magically become “sales representatives” keeping the product? Obviously no company could show a profit with that MLM “business opportunity model;” but magically they did: Hundreds of millions.

     

    The only way, as I explained to the Judge is from the eight new “customers” then turned recruiters at the bottom rung passing their $1200 to the individuals at the top of the “sales boards” and each replacing the exponentially expanding bottom rung with 2 new customers turned “sales persons” (recruiters) theoretically to infinity… or in reality… to collapse: Problem: each is told they can achieve the same results over and over and earn millions (which some in fact do) until the pool of new potential salespeople dries up.

     

    The anatomy of a pyramid scheme: Violation s. 206 (1)(e) Criminal Code…. s. 55.1 Canadian Competition Act

     

    Pyramid scheme: Comes in myriad sizes and disguises. Herbalife is an insidious, product masked, pyramid scheme. The “Ackmanites” and the Raven are correct.

     

    Note: Vacuum cleaners WERE “sold” so it seems… (in fact it was bona fide emeralds). It is not the sales, but rather the distribution of the proceeds at issue.

     

    Not verbatim, but the essence of the issue.

     

    David Thornton
    Concerned Citizen – No position in any stock: Simply doing what WE can to expose and prevent fraud.
    18 Dec 2013, 02:07 AM Reply Like
  • David Steadson
    , contributor
    Comments (346) | Send Message
     
    So what's your point, Dave? Ever heard the phrase "non sequitur"?
    19 Dec 2013, 09:12 AM Reply Like
  • Akmanscam
    , contributor
    Comments (2126) | Send Message
     
    So when does the SEC nail Ackman for market manipulation? What he did last year is called in the business as "Fermenting" It is creating a story, shorting a stock and taking a good company and stock down without reason or just cause and it is also illegal.

     

    Concerned Citizen – Long on HLF : Simply doing what WE can to expose and prevent frauds like Ackman
    18 Dec 2013, 01:02 PM Reply Like
  • CrimeBustersNow
    , contributor
    Comments (2172) | Send Message
     
    “Ackmanscam” is wondering….

     

    “So when does the SEC nail Ackman for market manipulation? What he did last year is called in the business as "Fermenting" It is creating a story, shorting a stock and taking a good company and stock down without reason or just cause and it is also illegal.

     

    Concerned Citizen – Long on HLF : Simply doing what WE can to expose and prevent frauds like Ackman
    ******
    And if true, Concerned Citizen, "Acmanscam"....one could nail Ackman's precocious "hide to the wall.!!!

     

    Q. Why doesn't someone just do that instead of moaning about it?

     

    That guy Icahn seem like a pretty savvy "School Yard Bully" type.

     

    The problems they would face here, though, "Ackmanscam" are the same problems that faced the 24 lawyer law firm that foolishly set out to "nail my 'impecunious hide to the wall" in a 10mil defamatory liable suit…

     

    And that is....

     

    1) The incorrect assumption that a story is being “CREATED" when in fact it is only being uncovered..
    2) Lack of “JUST CAUSE” as you mention
    3) The incorrect assumption they could fool the court into believing the MLM corporations TTI&BIM were… how did you phrase that? “....a good company?”

     

    And that’s the problem the SEC or Herbalife would encounter going after Ackman’s precocious hide or any of the hides of “Ackmanites.” .
    ..Herbalife can be proven, as were the corporations TTI&BIM that sued me... (as the Judge explained it in his 18 page decision)… “at least a prima facie violation of both the Criminal Code and the Federal Competition Act.”

     

    You see, “Ackmanscam” you don’t win a defamatory liable or “market manipulation” suit or a S.L.A.P.P. on that kind misrepresentation of a “corporation.” Herbalife is NOT a “good company” and that can easily be demonstrated before a court.

     

    Herbalife is an insidious MLM, product masked, predatory pyramid scheme that needs to be shut down. If you should doubt THAT,… have your Canadian counterpart participate in a test case – sue me!

     

    David Thornton
    Concerned Citizen – No position in any stock: Simply doing what WE can to expose and prevent fraud.
    19 Dec 2013, 08:06 AM Reply Like
  • Kay Herbert
    , contributor
    Comments (910) | Send Message
     
    David,
    "Herbalife is an insidious MLM, product masked, predatory pyramid scheme that needs to be shut down. If you should doubt THAT,… have your Canadian counterpart participate in a test case – sue me!"
    They will never sue you, they are not even willing to use their real names in their postings on SA- and there is probably a good reason for that.
    19 Dec 2013, 08:20 AM Reply Like
  • Yteeld
    , contributor
    Comments (1140) | Send Message
     
    The Pershing Square analyst that worked on the HLF short and presented with Ackman is no longer with the company......

     

    Why has Ackman kept this low key......................

     

    Is Shane the first head on the chopping block....................

     

    Is Ackman quietly unwinding his position before revealing this.......
    19 Dec 2013, 10:21 PM Reply Like
  • CrimeBustersNow
    , contributor
    Comments (2172) | Send Message
     
    David Steadson, asks …..
    “So what's your point, Dave? Ever heard the phrase "non sequitur"?”
    ****
    Don’t remember that used in my court case.

     

    But a narrow mind is incapable of comprehending a broader subject

     

    Herbalife is an insidious, product masked, MLM pyramid scheme and like the slave trade needs to be recognized as just that, and shut down.

     

    David Thornton
    Concerned Citizen – No position in any stock: Simply doing what WE can to expose and prevent fraud
    20 Dec 2013, 09:04 AM Reply Like
  • David Steadson
    , contributor
    Comments (346) | Send Message
     
    BTW Dave et.al., here's another one of those pyramid schemes and promoters that authorities simply ignore -

     

    http://1.usa.gov/1i8ra2d
    20 Dec 2013, 05:13 PM Reply Like
  • Akmanscam
    , contributor
    Comments (2126) | Send Message
     
    As I see it, the controversy is over. Herbalife has received a clean slate both from the courts of Belgium and on their reaudit. Case closed. Time for "Quoth the Raven, Crimebusters etc to move on to another scheme.
    21 Dec 2013, 03:06 PM Reply Like
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