Herbalife's Misleading Lesson About The Collapse Of Qualification Buying
Christine Richard • 307 Comments
Christine Richard • 307 Comments
Tue, Sep. 20, 4:46 PM
- via Bespoke - see table
- Five of the stocks have > 50% of their shares sold short.
- SHLD leads the pack.
Mon, Sep. 19, 1:45 PM
- In an inside baseball look of Carl Icahn's attempt to unload his 17M shares of Herbalife (HLF -0.2%) in August, Fortune reports the best bid Jefferies was able to obtain was $51.50 per share, roughly $10 less than the open market price at the time.
- Among those Jefferies contacted as a potential buyer was Bill Ackman, who quickly surmised the seller was Icahn.
- A number of events came together, however, giving Icahn just an eight-day window (Aug. 4-12) to sell through an unregistered block trade rather than a formal stock offering. Ackman had his own requirements to worry about, meaning he could only buy about 20% of Icahn's stake within that period.
- Though Jefferies couldn't arrange a sale by the 12th, the process continued, and on Aug. 25 the bank found a group of institutional investors willing to pay $51.50 for 11M of Icahn's 17M shares. The sale would have given Icahn a profit of $167M, but left him holding another 6M shares which could be vulnerable once news of his exit came out. Icahn's response: No deal.
- It was on Aug. 26 when news of his selling interest hit the press. Within hours, Icahn reversed course, picking up another 2.3M shares that day.
Wed, Sep. 14, 3:35 AM
- Carl Icahn is asking regulators for the option to up his Herbalife (NYSE:HLF) stake to 50% and said the company would be "better off private" to rid itself of Bill Ackman and avoid some of the public scrutiny it has received.
- That would be a huge increase, since Icahn's currently limited to 35% of shares (he raised his Herbalife stake last month to 21%).
- HLF +2.4% AH.
Tue, Sep. 13, 9:23 AM
- Herbalife's (NYSE:HLF) long-term tussle with short seller Bill Ackman still has legs. This morning, the company announced the release of a fourth video directed to his "highly questionable tactics to sully the company which "might cross ethical and possibly legal lines" and "clearly do not meet the established norms of Wall Street and standards of activist investors."
- Mr. Ackman launched his short thesis campaign almost four years ago and is still apparently under water.
Fri, Sep. 2, 5:14 PM
- Carl Icahn is still spiting fellow billionaire Bill Ackman, as an SEC filing shows Icahn bought almost another 307,000 shares of Herbalife (HLF +0.3%) two days ago.
- The Form 4 showed Icahn added 306,846 shares at $60.39 on Wednesday -- another $18.5M worth.
- His holdings after that add-on come to 19,611,529 shares ($1.2B worth).
- Last Friday, after Ackman suggested Icahn was trying to get out from under his position, Icahn went public with news that he actually added 2.3M more shares, and criticized Ackman for an "Herbalife obsession."
Fri, Aug. 26, 4:58 PM
- Herbalife (HLF -2.3%) has spiked after hours, +4%, on news that Carl Icahn actually bought 2.3M shares today against reports that he wanted out.
- The news follows a morning report that Icahn was shopping for a buyer for his 18% stake and had instructed Jefferies to find some.
- Icahn said he's never given Jefferies an order to sell his shares. "I continue to believe in Herablife; it's a great model that creates a great number of jobs for people."
- He denied allegations by Pershing Square's Bill Ackman that he had approached Ackman about purchasing his stake, criticizing him for his "Herbalife obsession."
Fri, Aug. 26, 4:59 AM
- Adding another twist to the drama over Herbalife (NYSE:HLF), Jefferies has been looking for the past month to find buyers for Carl Icahn's 18% (roughly $1B) stake in the company, according to David Benoit in the WSJ.
- As if the idea of Herbalife's largest shareholder exiting wasn't enough of a story, the report also says Bill Ackman was among a possible group of buyers.
- Icahn's sale, of course, would come just weeks after he expressed renewed confidence in the company following the FTC settlement, but he's been a seller of a number of stocks this year amid what he sees as a bubbly stock market.
- That Ackman would consider buying isn't so surprising given the squeeze his short position is in.
- Shares are down 6% premarket on increased volume.
Wed, Aug. 24, 2:12 PM
- The stock dropped quickly out of the gates this morning on chatter Carl Icahn might be parting with his 17M share stake in the company.
- It later bounced as Benzinga reported its sources as saying Icahn isn't selling, and Charlie Gasparino reported Herbalife (NYSE:HLF) officials as confirming the same thing.
- Herbalife's board one month ago gave Icahn the right to buy up to 34.99% of the company (up from the previous limit of 25%).
- Shares nevertheless remain near session lows, down 2.55%.
Wed, Aug. 3, 5:22 PM
- Q2 adjusted EPS of $1.29 vs. $1.24 in Q2 one year ago. Excluding currency impacts, revenue grew 10% Y/Y.
- Excluding FX, North American sales up 16% Y/Y, Asia Pacific up 2%, EMEA up 20%, Mexico up 9%, South and Central America up 3%, China up 8%.
- Full-year adjusted EPS guidance is lifted to $4.50-$4.80 from $4.40-$4.75.
- CC at 5:30 ET
- From the 10-Q: While the FTC settlement is only for U.S. operations, the company expects to roll out certain aspects globally.
- Previously: Herbalife beats by $0.08, beats on revenue (Aug. 3)
- HLF +2.3% after hours
Wed, Aug. 3, 4:08 PM
Tue, Aug. 2, 5:35 PM
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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.