LifeVantage: The MLM Opportunity Where The Top 1% Can Collect Food Stamps

Summary

• Company history teeming with curious events and business model shifts.
• Products have questionable benefit and their creators have colorful pasts.
• Despite marketing materials that promote visions of wealth, 99% of distributors earn commissions that would place them below the poverty line for a family of four.
• The company's policies seem to run afoul of many of the FTC's complaints with HLF, putting into question its long-term business model.

On July 15th, the Federal Trade Commission (FTC) began to dismantle the darker side of the multi-level marketing (MLM) industry in the US. Through fines and new regulations placed upon Herbalife (HLF), the FTC introduced a new regulatory standard that many anticipate will be enforced upon other MLMs. Market participants have searched for companies that could face significant business disruptions if and when the same restrictions were placed on them. Familiar MLMs are not perfect fits. Most, like Nu Skin (NUS), receive most or nearly all their revenues and profits outside the US. Others, like Primerica (PRI), face other potential regulatory issues but the HLF restrictions, many of which are focused on product sales, do not fit their models.

Enter LifeVantage (NASDAQ:LFVN). LifeVantage is a supplement company that shifted to an MLM model after it failed as a retail concept. Its primary supplement, Protandim, is hailed by believers for a wide range of uses from improving energy levels to fighting cancer. We see a company with a questionable history selling a product with questionable efficacy through distributors who receive a questionable benefit. Added together, given 78% of LifeVantage's revenues are generated in the US, we fear LifeVantage may have a questionable operating and stock price future in a post-HLF injunction world.

Questionable History

You can find a significant amount of information on the past of LifeVantage on a variety of blogs. Here are a few for your perusal

-What is LifeVantage

-LifeVantage Review: No retail focus mandatory autoship

-Protandim: Life extender or money waster?

LifeVantage is a 2004 reverse merger of Lifeline Therapeutics and a public shell company, Yaak River Resources. As it happens, Yaak was already the second use of a shell that originally went public in 1988 as Andraplex Corporation. At LifeVantage, William Driscoll, a former oil executive, and Paul Myhill, a former healthcare productivity consultant, worked

Analyst’s Disclosure:I am/we are short LFVN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.