Herbalife tanks on 'pyramid scheme' criticism
The weight-management company sees shares fall nearly 13% after a high-profile fund manager questions the business.
Herbalife (HLF) plunged nearly 13% Wednesday after one of the world's most prominent fund managers said he's betting against the weight-management company. By market close, however, shares had recovered to about a 5% loss.
Bill Ackman, who's in charge of $11 billion in assets at Pershing Square Capital Management, confirmed that he's taken a short position in the stock. Short sellers borrow shares and sell them, holding out hopes of buying them back at a lower price and then returning them. Essentially, short sellers target stocks they think will lose value fairly quickly.
Ackman told CNBC that he's been researching Herbalife and thinks it's a "pyramid scheme." He said he has been short on the shares for seven to eight months. Herbalife sells protein shakes and vitamin supplements, among other products.
Ackman is expected to share more thoughts on the stock at an investment conference Thursday in New York, CNBC reported.
Ackman is a high-profile investor and his word is taken very seriously on Wall Street. He has an activist bent, often pressing for changes at companies he's interested in. The Globe and Mail recently named him 2012 CEO of the year, saying that in Canada he is a "boardroom barbarian who toppled four-star corporate generals at one of the country’s most historic companies."
Herbalife has been in Wall Street's doghouse since May, when another famous short seller, David Einhorn of Greenlight Capital, asked pointed questions about operations in an investor conference call. The stock went from more than $70 to $53 that day, and has continue falling since to $38.05 Wednesday.
More from Money Now
I'm with Good Bargains. Regardless of the effectiveness of one of the products many are exaggerated in advertising, Einhorn made similar statements back in May and has profitted from them. If there were legal grounds to prosecute for misrepresentation, one would think that would have already been underway against Herbalife. That Einhorn and now Ackman are making public statements to in effect up the return on their shorts seems prosecutible as I understand it regardless of what type of bully Ackman is. An activist would do something without expected gain, a financial "bully" will first set his base, buy in , then manipulate the market to his advantage.
An Walk Street isn't a Pyramid Scheme. Come on....................... Bernie
Lets see. You have to recruit people to sell for you. As well as sell to. While working with "Your Sponsor" who has server member that working at the same level you are. Who helps you find other people to so you can sponsor them. Once you have your group together. You start helping them find their member that they can sponsor. The whole while you are building level upon levels that a percentage of their sales comes to you and your sponsor and your sponsor's sponsor.
So, NOOOOOOO.... it is not a Pyramid.. Noooo wait.. Sponsor
Sponsor ,Sponsor ,Sponsor
Sort of looks like a Pyramid, But just because it looks like a duck, quakes like a duck, and walks like a duck ... does not mean it is a DUCK. Maybe it is Swan
it is a pyramid scheme. they call it multi-level marketing. basically you make the person at the top quite wealthy while you struggle. I used to be a supervisor level, and lost my shorts.
Copyright © 2014 Microsoft. All rights reserved.
[BRIEFING.COM] The Nasdaq Composite (+0.5%) and S&P 500 (+0.2%) posted modest gains on Thursday, but not before enduring a morning dip into the red, which took place in reaction to reports indicating Russia has commenced military exercises on the Ukrainian border.
The news from Europe knocked the key indices from their early highs, while giving a boost to safe-haven assets like gold futures (+0.5% to $1290.80/ozt), Treasuries (10-yr yield -1 bps to 2.69%), and the Japanese yen (102.30 ... More
More Market News
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'