Herbalife, under fire, denies pyramid claim
The embattled company likens itself to the Girl Scouts, which offers cookies through direct sales. 'Nobody attacks them,' the CEO laments.
In a presentation to investors in New York City, CEO Michael Johnson lashed out at claims leveled against Herbalife by short seller William Ackman of Pershing Square, who has bet that the stock will fall. As the Wall Street Journal noted in its live blog of the event, Johnson didn't mince words in his hours-long presentation.
"Don't believe everything you hear," Johnson is quoted as saying. "We've got a great company and we're moving forward with it. . . . Girl Scouts sell cookies on a direct-selling basis. Nobody attacks them."
He later went on CNBC and made many of the same points. Johnson, whose company is under investigation by the Securities & Exchange Commission, scoffed at Ackman's promise that he would donate his profits from shorting Herbalife to charity. Shares of Herbalife, which were up before the interview, began trading down in the afternoon.
"He is going to donate all of his profits?" Johnson asked. "I will believe that when I see it."
Not surprisingly, Johnson declined to comment on the SEC's probe or a possible lawsuit against Ackman. The questions surrounding Herbalife, which has been around for 32 years, aren't going to be settled any time soon. Many on Wall Street like the stock. The average 52-week price target on the stock is $71.43, about 80% higher than where it currently trades.
Another activist investor, Third Point's Daniel Loeb, has taken a long position in Herbalife and is now the company's second-largest shareholder. Carl Icahn, yet another billionaire investor, may have also bet that Herbalife's shares will rise, according to the New York Post.
Herbalife, based in the Cayman Islands, has been dogged by controversy since it went public in the 1990s. Founder Mark Hughes died in 2000 following an accidental overdose of alcohol and anti-depressants. His estate has been involved in numerous legal battles since then. David Einhorn, another short seller, spooked the stock market last May when he raised questions about the company's finances.
"Eighty percent of what Ackman had said was already out there," said Sam E. Antar, a convicted felon who gained fame as CFO of Crazy and now is a consultant on White Color fraud, in an interview. He added that the SEC has been aware of abusive practices of multi-level marketers for years and failed to address them.
Though Antar is rooting for Ackman to prevail, he said it will not be easy given the power of the multi-level marketing industry.
"It's going to be a 15-round boxing match," he said.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr
More on Money Now
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market punctuated July with a broad-based retreat that sent the S&P 500 lower by 2.0% with all ten sectors ending in the red. The benchmark index posted a monthly decline of 1.5%, while the Russell 2000 (-2.3%) underperformed to end the month lower by 6.1%.
To get a better feel for what led to today's retreat, we'd like to look back to Wednesday, when the market had ample reason to rally, but did not. Instead, it ended basically flat after a sloppy day of ... More
More Market News
Investors are anxious to see if hiring can maintain its strong pace in the second half of the year.
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'