- In this morning's Q2 investor call, Pershing Square's Bill Ackman said Q2 comprehensive performance up 5 - 6%.
- Valeant (VRX +4.8%) position down ~23%. Restructured option position, extended term one year. Call/put position established at $60. FDA decision on B&L glaucoma candidate due tomorrow.
- Herbalife (HLF +0.2%) position down 4%. Pershing says FTC's claims support its pyramid scheme thesis. Mandated changes are most comprehensive for pyramid scheme-type situations.
- Ackman says the primary aim of Herbalife's current PR campaign trumpeting the FTC settlement is to prevent distributor exodus. In a video, FTC Chair Edith Ramirez said she did not agree with HLF's statement that it was "not a pyramid scheme." Pershing presentation a rehash of points made last year.
- Now matter how intense and persistent Mr. Ackman sells his short thesis, the company's stock price is not likely to cooperate without an erosion in Herbalife's fundamentals. Pershing believes this is inevitable because of the FTC requirements which includes a limit on the amount of compensation for product sales for personal consumption. It believes Herbalife will be unable to find enough retail customers to support its current valuation. Says annual EPS could drop as low as ~$2/share.
- Previously: Pershing Square continues to beat its "Herbalife is a pyramid scheme" drum, publishes comparison to shuttered Vemma Nutrition (Sept. 15, 2015)
- Update: In a statement, Herbalife EVP, Global Corporate Affairs Alan Hoffman says, "After more than two years working with the FTC, I think we understand the terms of the settlement agreement very well. We would not have settled unless we had the greatest confidence in our ability to comply with the agreement and grow out business and we believe this will be proven out over time."