Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Yes, Nu Skin is very lucky they aren't being targeted by this. Someone could do the same thing to them that Ackman did to HLF. They are probably next in line.
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Go to the website, lazymanandmoney.com. My website has in the WSJ, US News and World Report, Yahoo Finance, Lifehacker, The Consumerist, and others. I have a section on MLM that I've been writing about for years. I've written about MonaVie, LifeVantage, and One24 scams (amongst others) and each have threatened to sue me for defamation. I've stood up to them, representing myself, and they've backed down from their threats as they know they have no case.
How long have you been studying and writing about MLMs and pyramid schemes?
(I don't invest in any MLM stocks. I believe that they have the potential to return great profits since their sales force pays them for the privilege of earning less than minimum wage. At the same time, the ones I've looked into don't appear to be legal according to the FTC's definitions, and I don't believe it is wise to invest in illegal businesses.)
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Clearly he's got nothing to be afraid of. It wouldn't really matter because nothing on Ackman's computer would be applicable to whether Herbalife is or is not a pyramid scheme.
He's the messenger delivering a message. The content of the message remains unchanged.
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Ackman is limited to information that is publicly available. He is very confident that it is enough information, but at the same time he's mentioned that HLF has stopped reporting information in recent years.
A lawsuit can only help his case as he'll be able to subpoena the information that HLF has been withholding.
In short it would be HLF digging their own grave.
You are reading too much into the comment. He was clearly quite confident in his call that it is a pyramid scheme saying that he understands the legal ramifications. If he wasn't sure that he could prove it, he wouldn't open himself up such a lawsuit.
There's no legal problem for Ackman as he's got a strong case for his beliefs. That's the burden of proof in a defamation case. Herbalife would have to show that they intentionally falsified information otherwise it just comes off as Ackman's first amendment to express his opinion.
Also, HLF wouldn't be able to establish personal gain for Ackman, which is key for any corporation defamation case (look it up) since he's donating the money to charity. He's taking all the financial risk if he's wrong (the stock goes up) and getting none of the rewards if he's right (the stock goes down and he gives the money to charity.)
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
1) A lot of the presentation had information the last couple of years including the nutrition clubs. Clearly Ackman was limited to the information that was publicly available and Herbalife stopped disclosing the information. You can't paint a broad brush of it being outdated... you have to go through and specifically mention which parts you believe to no longer be relevant and why. A lot of the quotes were from Michael Johnson himself.
If you say that the information was outdated, then you have to throw out the argument that the company has been around for 32 years (one of their big "defenses") because at the very least the information supports it being a pyramid scheme in 2004, some 24 years of their history, right?
2) Ackman (not Ackerman) presented a very comprehensive case for why he believed it to be a pyramid scheme. According to the FTC, deceptive practices like showing videos that depictive of the typical opportunity is a big problem for the company. If that is against Herbalife's policies, Herbalife can make an example that it doesn't tolerate such behavior and cancel the person's distributorship for the violation. They *should* do this, but they never will because it sends a bad message to other Herbalife distributors ("We can take your business away if you violate our policies"). Herbalife's inaction and inability to police their top distributors (there aren't that many of them) reflects badly on Herbalife.
3) Ackman uses the FTC's definitions for MLMs that are pyramid schemes. In those definitions, there really isn't a difference between being paid to recruit someone and being financially rewards from sales volume for building and organization. In fact the FTC has said repeatedly that companies use products (i.e. the compensation of sales volume that is required to participate) to hide the scheme. If you'd like to argue differently please familarize yourself with the FTC with what the FTC says about MLMs and pyramid schemes (this is a good place to start: http://1.usa.gov/KyaUBM)
Please don't use the corporate America is a pyramid scheme (http://bit.ly/ZqUQj6) argument. You seem to be confusing a heirarchical organization (http://bit.ly/UQXgjU) with a pyramid scheme (http://bit.ly/RkWP0S). There's no endless recruiting in heirarchical organizations as just one of the main differences. Because there's no recruiting, it's sustainable. It's not like the janitor needs to recruit people below him to make his money.
4) Let's see if Herbalife comes up with that proof that the majority of the products are sold outside of their distributor network. If they do this, I'll be pretty convinced they aren't a pyramid scheme. I have my doubts, because if they could have done it, you'd think they would have being doing it for 32 years to prevent this kind of thing in the first place. Also, if all these people outside of the distributor network are buying product, you'd think that Formula 1 would be a well-known brand from the sales numbers. Yet the product is a relative unknown.
5) There is no law against a company rewarding distributors for selling their products to customers. I don't think Ackman said there was or is against this practice. In fact, he'd probably prefer that they reward people more for actual sales to end consumers rather than recruiting which is a sign of a pyramid scheme.
6) I think Ackman has access to good attorneys as well. I think he's worth more money than Herbalife now. If it comes down to who has better lawyers, I'd vote Ackman. However, it often comes down to the facts of the case and Herbalife's attorneys failed in Belgium when they declared it a pyramid scheme.
7) It isn't a self-serving study since the money goes to charity... it isn't dificult to see how it can happen, people donate money to charity all the time. There's a difference between having enough information to make an educated decision and putting together a very detailed presentation for the consumption of others. For example, he might have known that the nutrition clubs were not as they are depicted in Herbalife's official marketing materials, but he went the extra mile to get multiple pictures as evidence to show the world what he already knew. This kind of thing can take 7 months.
There's some personal reward for being right about a company being a pyramid scheme. There's also a personal reward for policeman to catch a robber. Should the policeman let the robber go because he doesn't want to be seen as a hero? Of course not. If Ackman is wrong, his reputation is trashed. If the policeman arrests someone who wasn't a robber, it reflects poorly on him. It's a double-edged sword. If you believe that Herbalife isn't a pyramid scheme and is doing everything right, then you can't claim that Ackman is going to be personally rewarded... it would be the opposite.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
Belgium's ruling was significant to the US. The rules are similar and if you think they are widely different, please be more verbose and detailed in your arguments.
Don't rely on the SEC, who failed in investigating Bernie Madoff. Show us your proof.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
Ackman admits that he's using publicly available information. That's part of the strength of the presentation... no one can claim that he's making up any of the information to suit a "motive" (though many people here have anyway).
Making the information readily available in a consumable format is a significant step forward. It truth most of this information was well articulated at PyramidSchemeAlert.com, but the website doesn't have the Wall Street audience like Ackman.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
If Herbalife has a premium product as DA Davidson analysts Ramey wrote about in his research, why wouldn't the people who have money to buy premium products (fund managers, analysts, Wall Street professionals) be familiar with the product?
Tiffany's jewelry is another premium product and I'm sure fund managers buy their products.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
Herbalife had a chance to give a high level response and they've chosen not to, saying that they'll wait a couple of weeks.
It's worth noting that this is a failure of their management team. They should have had bullet-proof evidence that they aren't a pyramid scheme back when Einhorn implied it back in May
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
"He clearly has a good deal of conviction regarding his thesis, but it is increasingly difficult for anyone else to be short the stock, as it has gotten increasingly expensive to short HLF. "
Okay, so how is that an argument against the pyramid scheme thesis?
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
The SEC was warned many times about Bernie Madoff by Harry Markopolos and they were investigated and found nothing.
Bernie Madoff's scam was $50 billion dollars vs. the $3 billion of Herbalife.
It's hard to claim that the SEC missed something that is at least 10x bigger than Herbalife when they've been told about it. Considering that the SEC investigated and missed Madoff's $50 billion scam years before they finally caught it, we can't presume their investigations are effective.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
It's worth noting that the "MLM models" have been found to be pyramid schemes by FTC in the past. It isn't Ackman's personal opinion as you suggest.
MLM distributors who get burned are conditioned to believe that it is their own fault as "the business model works, the only variable is you." They have recruited their friends and family and don't want to admit fault.
As Ackman showed, only about ~10% of distributors renew their distributor agreements. If the business model is so appealing why do ~90% leave?
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Are there big GDP countries that Herbalife can still expand into? Maybe someone could create a list of big countries that Herbalife isn't already in.
I will add that a bad economy also helps Herbalife's growth. When people can get well paying jobs, they aren't desperate enough to take any "business opportunity" that comes along. A high unemployment creates a bigger market for Herbalife.
Herbalife could do a lot of clarification by breaking out the sales by country throughout their history. It would be a very easy chart and it would go a long way to proving or disproving Ackman's pop-and-drop theory.
Herbalife's accounting people should have been able to put this out in 24 hours after the presentation. Anyone who was long HLF should be asking where it is.
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
For the most part, it is just calorie replacement, it's not like Herbalife has ephedra or any other special ingredients that help you lose weight.
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
How long have you been studying and writing about MLMs and pyramid schemes?
(I don't invest in any MLM stocks. I believe that they have the potential to return great profits since their sales force pays them for the privilege of earning less than minimum wage. At the same time, the ones I've looked into don't appear to be legal according to the FTC's definitions, and I don't believe it is wise to invest in illegal businesses.)
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
He's the messenger delivering a message. The content of the message remains unchanged.
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
A lawsuit can only help his case as he'll be able to subpoena the information that HLF has been withholding.
In short it would be HLF digging their own grave.
You are reading too much into the comment. He was clearly quite confident in his call that it is a pyramid scheme saying that he understands the legal ramifications. If he wasn't sure that he could prove it, he wouldn't open himself up such a lawsuit.
There's no legal problem for Ackman as he's got a strong case for his beliefs. That's the burden of proof in a defamation case. Herbalife would have to show that they intentionally falsified information otherwise it just comes off as Ackman's first amendment to express his opinion.
Also, HLF wouldn't be able to establish personal gain for Ackman, which is key for any corporation defamation case (look it up) since he's donating the money to charity. He's taking all the financial risk if he's wrong (the stock goes up) and getting none of the rewards if he's right (the stock goes down and he gives the money to charity.)
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
If you say that the information was outdated, then you have to throw out the argument that the company has been around for 32 years (one of their big "defenses") because at the very least the information supports it being a pyramid scheme in 2004, some 24 years of their history, right?
2) Ackman (not Ackerman) presented a very comprehensive case for why he believed it to be a pyramid scheme. According to the FTC, deceptive practices like showing videos that depictive of the typical opportunity is a big problem for the company. If that is against Herbalife's policies, Herbalife can make an example that it doesn't tolerate such behavior and cancel the person's distributorship for the violation. They *should* do this, but they never will because it sends a bad message to other Herbalife distributors ("We can take your business away if you violate our policies"). Herbalife's inaction and inability to police their top distributors (there aren't that many of them) reflects badly on Herbalife.
3) Ackman uses the FTC's definitions for MLMs that are pyramid schemes. In those definitions, there really isn't a difference between being paid to recruit someone and being financially rewards from sales volume for building and organization. In fact the FTC has said repeatedly that companies use products (i.e. the compensation of sales volume that is required to participate) to hide the scheme. If you'd like to argue differently please familarize yourself with the FTC with what the FTC says about MLMs and pyramid schemes (this is a good place to start: http://1.usa.gov/KyaUBM)
Please don't use the corporate America is a pyramid scheme (http://bit.ly/ZqUQj6) argument. You seem to be confusing a heirarchical organization (http://bit.ly/UQXgjU) with a pyramid scheme (http://bit.ly/RkWP0S). There's no endless recruiting in heirarchical organizations as just one of the main differences. Because there's no recruiting, it's sustainable. It's not like the janitor needs to recruit people below him to make his money.
4) Let's see if Herbalife comes up with that proof that the majority of the products are sold outside of their distributor network. If they do this, I'll be pretty convinced they aren't a pyramid scheme. I have my doubts, because if they could have done it, you'd think they would have being doing it for 32 years to prevent this kind of thing in the first place. Also, if all these people outside of the distributor network are buying product, you'd think that Formula 1 would be a well-known brand from the sales numbers. Yet the product is a relative unknown.
5) There is no law against a company rewarding distributors for selling their products to customers. I don't think Ackman said there was or is against this practice. In fact, he'd probably prefer that they reward people more for actual sales to end consumers rather than recruiting which is a sign of a pyramid scheme.
6) I think Ackman has access to good attorneys as well. I think he's worth more money than Herbalife now. If it comes down to who has better lawyers, I'd vote Ackman. However, it often comes down to the facts of the case and Herbalife's attorneys failed in Belgium when they declared it a pyramid scheme.
7) It isn't a self-serving study since the money goes to charity... it isn't dificult to see how it can happen, people donate money to charity all the time. There's a difference between having enough information to make an educated decision and putting together a very detailed presentation for the consumption of others. For example, he might have known that the nutrition clubs were not as they are depicted in Herbalife's official marketing materials, but he went the extra mile to get multiple pictures as evidence to show the world what he already knew. This kind of thing can take 7 months.
There's some personal reward for being right about a company being a pyramid scheme. There's also a personal reward for policeman to catch a robber. Should the policeman let the robber go because he doesn't want to be seen as a hero? Of course not. If Ackman is wrong, his reputation is trashed. If the policeman arrests someone who wasn't a robber, it reflects poorly on him. It's a double-edged sword. If you believe that Herbalife isn't a pyramid scheme and is doing everything right, then you can't claim that Ackman is going to be personally rewarded... it would be the opposite.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
Don't rely on the SEC, who failed in investigating Bernie Madoff. Show us your proof.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
The smoking gun is even more hidden than it was in the Enron case.
The ability to hide and discover the truth should not be the conversation.
It should be the truth itself.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
Making the information readily available in a consumable format is a significant step forward. It truth most of this information was well articulated at PyramidSchemeAlert.com, but the website doesn't have the Wall Street audience like Ackman.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
Tiffany's jewelry is another premium product and I'm sure fund managers buy their products.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
It's worth noting that this is a failure of their management team. They should have had bullet-proof evidence that they aren't a pyramid scheme back when Einhorn implied it back in May
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
Okay, so how is that an argument against the pyramid scheme thesis?
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
Bernie Madoff's scam was $50 billion dollars vs. the $3 billion of Herbalife.
It's hard to claim that the SEC missed something that is at least 10x bigger than Herbalife when they've been told about it. Considering that the SEC investigated and missed Madoff's $50 billion scam years before they finally caught it, we can't presume their investigations are effective.
In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
MLM distributors who get burned are conditioned to believe that it is their own fault as "the business model works, the only variable is you." They have recruited their friends and family and don't want to admit fault.
As Ackman showed, only about ~10% of distributors renew their distributor agreements. If the business model is so appealing why do ~90% leave?
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
I will add that a bad economy also helps Herbalife's growth. When people can get well paying jobs, they aren't desperate enough to take any "business opportunity" that comes along. A high unemployment creates a bigger market for Herbalife.
Herbalife could do a lot of clarification by breaking out the sales by country throughout their history. It would be a very easy chart and it would go a long way to proving or disproving Ackman's pop-and-drop theory.
Herbalife's accounting people should have been able to put this out in 24 hours after the presentation. Anyone who was long HLF should be asking where it is.