Herbalife's Misleading Lesson About The Collapse Of Qualification Buying
Christine Richard • 304 Comments
Christine Richard • 304 Comments
Wed, Jul. 20, 12:14 PM
- 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."
Tue, Jul. 19, 2:11 PM
Fri, Jul. 15, 12:46 PM
Fri, Jul. 15, 12:00 PM
Fri, Jul. 15, 11:35 AM
- In a statement, Herbalife (HLF +13.9%) says its settlement with the Federal Trade Commission (FTC) will not change its business model as a direct selling firm. CEO Michael Johnson says, "The settlements are an acknowledgment that our business model is sound and underscore our confidence in our ability to move forward successfully, otherwise we would not have agreed to the terms."
- According to the company, the $200M settlement only applies to U.S. sales, about 20% of its total top line. The revised policies and procedures that are to be implemented have, at least in part, already been put into place.
- The two primary aspects of the new compensation structure are:
- Members, current and new, will be categorized as either a "preferred" member or distributor. The former will be eligible to purchase products at a discount and the latter are those who choose to build a business and directly sell products.
- Distributors will be compensated based on retail sales (receipts required), including purchases for personal use (within allowable limits).
- Other agreed-to terms include enhanced distributor training, the requirement of a business plan and a one-year waiting period before opening a nutrition club; extending the amount of time a distributor may return an initial membership pack; paying all shipping costs associated with any returned products; prohibiting automatic shipping of products; auditing by an independent third party and extending the protections on income claims including greater specificity around lifestyle claims.
- The company also settled the Illinois Attorney General's investigation by paying $3M. It says that it is unaware of any active inquiries by any other state attorney general.
Fri, Jul. 15, 9:16 AM
Fri, Jul. 15, 8:52 AM
- In a statement, the Federal Trade Commission announces that it has settled its complaint against Herbalife (NYSE:HLF). The company will pay $200M to compensate consumers and be required to restructure its U.S. business operations, specifically its compensation scheme because it rewards distributors for recruiting others to join and purchase products in order to advance in the marketing program rather than growing retail demand for the products.
- Herbalife will be required to fundamentally revamp its business so participants are rewarded for what they sell, not how many people they recruit. Under its current structure, the vast majority of distributors make little-to-no income and many actually lose money.
- Under the terms of the settlement, the company will pay for an Independent Compliance Auditor who will monitor its adherence to the FTC's order provisions. It is specifically prohibited from making claims that members can "quit their jobs" and enjoy a lavish lifestyle.
- HLF is up 10% premarket on robust volume.
Fri, Jul. 15, 8:00 AM
- Herbalife (NYSE:HLF) is up 15% premarket on increased volume on chatter that it is preparing to announce its settlement with the FTC, supposedly a $200M fine. FTC determined that the company is not a pyramid scheme.
Fri, Jul. 15, 4:45 AM
- Billionaire hedge fund manager Bill Ackman is still betting against Herbalife (NYSE:HLF) despite it costing him more than $20M a year in carrying cost alone.
- A Fortune article previously suggested he was paying about $100M annually to maintain the position
- On Herbalife's FTC investigation: "The only way this thing gets resolved in my opinion is if HLF makes material changes to their incentive structure," Ackman said. "My guess is that is what the government is pushing for."
- Will the investment end up like his bets on Borders, J.C. Penney and Target?
Thu, Jul. 14, 4:07 PM
- Hedge fund honcho Bill Ackman is stubbornly sticking with his $1B short position in multi-level marketing firm Herbalife (HLF -0.1%) despite losing a bucket of money over the past two years as HLF has rallied over 100% since early 2015. In an interview on CNBC today, he said that despite the need for restraint in recruiting new distributors as its settlement discussions with the Federal Trade Commission (FTC) draw to a close, many current Herbalife distributors continue to host webinars during which they mislead prospective recruits about the income potential. He also added that he is a "patient" investor with his short position and intends to stay the course considering its "best ever" risk-to-reward profile.
- Herbalife is in advanced talks with the FTC regarding a rumored $200M fine to settle all charges in the regulator's pyramid scheme probe. At the end of Q1, the company had ~$774M in cash so it can afford to pay the penalty and move on.
- Read now Herbalife: Get Out Of Dodge
- Update: Herbalife is preparing an announcement of its FTC settlement, apparently $200M. Shares up 15% premarket Friday.
Tue, Jun. 21, 2:54 AM
- Bill Ackman and Herbalife (NYSE:HLF) are at it again as investors await the outcome of an FTC probe into the operations of the nutritional supplements maker.
- Pershing Square has released the first in a series of videos this week that illustrates what Ackman calls the company's predatory recruiting practices.
- Herbalife already has a slew of videos against the fund manager on its website - www.therealbillackman.com - where it calls his legacy "riddled with losses."
Tue, May 24, 11:54 AM
- Herbalife (HLF +7.1%) spikes on news that the company has reached a preliminary settlement with the Federal Trade Commission (FTC) regarding its pyramid-scheme probe.
- Update: CNBC's Scott Wapner says a deal is not imminent. Fox Business's Charles Gasparino concurs, but adds that discussions are in the advanced stage.
Fri, May 6, 5:37 PM
Fri, May 6, 9:11 AM
Thu, May 5, 5:35 PM
Thu, May 5, 4:29 PM
- Herbalife (NYSE:HLF) Q1 Results ($M): Total Revenues: 1,1119.6 (+1.3%); North America: 246.0 (+8.5%); Mexico: 109.7 (-11.2%); South/Central America: 127.0 (-21.5%); EMEA: 198.4 (+6.4%); Asia Pacific: 221.1 (-8.9%); China: 217.4 (+32.4).
- Net Income: 95.8 (+22.5%); Non-GAAP Net Income: 116.1 (+6.7%); EPS: 1.12 (+21.7%); Non-GAAP EPS: 1.36 (+5.4%); CF Ops: 141.1 (-12.4%). Consensus: EPS of $1.09 on revenues of $1.07B.
- Volume Points: North America: 319.5 (+7.3%); EMEA: 260.7 (+14.1%); Asia Pacific: 249.5 (-6.2%); Mexico: 215.9 (+6.1%); South/Central America: 177.8 (-15.5%); China: 155.2 (+36.5%).
- 2016 Guidance: Volume Point Growth: 2.0 - 5.0%; Net Sales Growth: 1.5 - 4.5%; Non-GAAP EPS: $4.40 - 4.75; CAPEX: $145M - 175M.
- Q2 Guidance: Volume Point Growth: 1.5 - 4.5%; Net Sales Growth: 0.0 - 3.0%; Non-GAAP EPS: $1.10 - 1.20; CAPEX: $65M - 75M.
- Q2 Consensus: EPS of $1.16 on revenues of $1.19B.
- Shares are up 12% after hours on robust volume.
Herbalife Ltd. is a global nutrition company. It offers range of science-based weight management products, nutritional supplements and personal care products intended to support a healthy lifestyle. The company's products are categorized into four principal groups: weight management, targeted... More
Industry: Drug Related Products
Country: United States
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