Are you following the Ackman vs Herbalife drama ?

[Zelhar]

It has been evolving since last December. I always new, ever since I was invited once to a recruiting "party" by a friend, for another mlm.


http://factsaboutherbalife.com/

[Kahane-Was-Right BT]

Lol yes but not trading the stock.   Ackman is full of crap and so is herbalife.

His thesis may be partially correct but not fully.   Some of the "distributors" that he claims will always drop out when they go in the red are actually customers who regularly use the product and became distributors only to get a discount on the product.   I have personally met some people who lost a tremendous amount of weight on their products and keep using it.   That said reducing calorie intake always wins and the only reason hlf products "work" is because they are often used as meal replacement and are used in conjunction with increase exercise.  Increased exercise and less intake always wins.

[Kahane-Was-Right BT]

Also zckman outwardly professes to be a pervert and the way he went about his trade is sickening.

[angryChineseKahanist]

I agree they're both full of krap.
But I think he hates them because they want him to lose weight.

[Zelhar]

They sell some junk nutritional products hardly anyone wants to actually consume and the few who do can buy a better cheaper brand at every supermarket and convenience store.

But what they are really after is suckers to recruit as "distributors" who are encouraged to recruit even more distributors they have no end customer who actually wants to buy their crap.

I think any unbiased person who look at their operation must conclude they are an illegitimate fraud.

I don't know much about Ackman and I never expected him to be a particularly righteous person. But Herbalife is clearly a scam and he made a very good case about.

Some other hedge fund billionaires took a long position, at least one of them, Icahn, has done this just for spite, the others might have just tried to exploit a technical trade opportunity (short squeeze). They are bigger dirt bags then Ackman because they would legitimize that fraud as long as they can make a profit out of it.

[Spiraling Leopard]

I drank one herbalife milkshake someone offered me once and it smelled like cold puke.

[Kahane-Was-Right BT]

They sell some junk nutritional products hardly anyone wants to actually consume and the few who do can buy a better cheaper brand at every supermarket and convenience store.

. There are people who are convinced it's better than what is in the supermarket.  You can claim they are wrong or stupid but that is what any brand tries to do, convince people their product is superior.

I think any unbiased person who look at their operation must conclude they are an illegitimate fraud.

What is an unbiased person?
Its not a fraud if they follow the rules, and even with ackman's desperate plea for the authorities to help make his trade a successful one, the SEC hasn't even interested itself in an investigation all these years.

Some other hedge fund billionaires took a long position, at least one of them, Icahn, has done this just for spite, the others might have just tried to exploit a technical trade opportunity (short squeeze). They are bigger dirt bags then Ackman because they would legitimize that fraud as long as they can make a profit out of it.

I think you are missing the fact that they also don't think it's a fraud.   Fraud has a real definition and just because something is an MLM or you don't like that the people on top make all the money, that still doesn't make it a fraud.   

The dirt bag was the one who took a giant short position then publicly announces his "analysis" that the sec needs to investigate it because it might be a fraud in his opinion, right at year-end to save his fund which underperformed in 2012 (and I think in 2011 too) with a media blitz and his ridiculous self promotion that he is only out to help victims of hlf and will give his winnings to charity.   That is classless and dishonest.  He went short to make money, and spending his gains right away doesn't mean he doesn't gain from it.  He's giving it to the charity of his choice just as all people are free to give to whatever they want.  The idea that he doesn't benefit personally is a joke, and of course his investors would be winning from it too and staying in his fund.   Just total BS.  "the sec should investigate" is not a short thesis.   The sec operates independent from hedge fund managers and their desperate cries to help their trade or intimidate retaail investors.    Icahn called him out on all this and more on live TV and made ackman look very foolish.

[Zelhar]

There are people who are convinced it's better than what is in the supermarket.  You can claim they are wrong or stupid but that is what any brand tries to do, convince people their product is superior.

Then they should either buy it on eBay at a steeper discount then the distributes buy the crap, or they can buy from a failed "distributor" his stock at a steep discount, after all 99% of those distributors loose money and at some point they are just trying to cut their losses and would dump their "merchandise" on anyone who would pay for it something.

What is an unbiased person?
Its not a fraud if they follow the rules, and even with ackman's desperate plea for the authorities to help make his trade a successful one, the SEC hasn't even interested itself in an investigation all these years.

Common sense shows it is a fraud. Their financial accounts make no sense. Their marketing makes no sense. The fact that they pray on poor and unemployed people with false promise of getting rich fast prove it is a fraud.

The dirt bag was the one who took a giant short position then publicly announces his "analysis" that the sec needs to investigate it because it might be a fraud in his opinion, right at year-end to save his fund which underperformed in 2012 (and I think in 2011 too) with a media blitz and his ridiculous self promotion that he is only out to help victims of hlf and will give his winnings to charity.   That is classless and dishonest.  He went short to make money, and spending his gains right away doesn't mean he doesn't gain from it.  He's giving it to the charity of his choice just as all people are free to give to whatever they want.  The idea that he doesn't benefit personally is a joke, and of course his investors would be winning from it too and staying in his fund.   Just total BS.  "the sec should investigate" is not a short thesis.   The sec operates independent from hedge fund managers and their desperate cries to help their trade or intimidate retaail investors.    Icahn called him out on all this and more on live TV and made ackman look very foolish.

I think it is perfectly legitimate to short the stock and then come out public with it. There is no ethical difference between making a case for a long position you already took or to a short position. In the case of long position funds are required by law to disclose holdings in a company that are beyond a threshold of 5% of the market capital.

I also read the case that Ackman presented and it is a very straight forward sensible factual detailed report that proves Herbalife is a scam.

[Rubystars]

Lol yes but not trading the stock.   Ackman is full of crap and so is herbalife.

His thesis may be partially correct but not fully.   Some of the "distributors" that he claims will always drop out when they go in the red are actually customers who regularly use the product and became distributors only to get a discount on the product.   I have personally met some people who lost a tremendous amount of weight on their products and keep using it.   That said reducing calorie intake always wins and the only reason hlf products "work" is because they are often used as meal replacement and are used in conjunction with increase exercise.  Increased exercise and less intake always wins.

A few years ago I saw an article about a product called "Slim slippers". apparently you're supposed to put the slippers on and walk up and down a hallway with them or something for 30 minutes a day.  Hmmm, must be the slippers causing the results... 

[syyuge]

"Slim slippers" must have been a grand idea. 

[angryChineseKahanist]

I drank one herbalife milkshake someone offered me once and it smelled like cold puke.

That was cold puke.

[Kahane-Was-Right BT]

Then they should either buy it on eBay at a steeper discount then the distributes buy the crap, or they can buy from a failed "distributor" his stock at a steep discount, after all 99% of those distributors loose money and at some point they are just trying to cut their losses and would dump their "merchandise" on anyone who would pay for it something.
Common sense shows it is a fraud. Their financial accounts make no sense. Their marketing makes no sense. The fact that they pray on poor and unemployed people with false promise of getting rich fast prove it is a fraud. 

Some people do succeed at making money through herbalife and they are the ones who stick around.   The ones who fail drop out.  That's the nature of MLM.   But MLM is not fraud by the definition of fraud.   It may be "something Zelhar doesn't like" or "something that irks Zelhar" but it is not fraud.

I think it is perfectly legitimate to short the stock and then come out public with it. 

Typically, the big investors don't do this, they let their filings speak for themselves.  Or if they have some issue to raise about a company (like, why are you doing xyz?  Or how will you deal with upcoming xyz, and so on) they do so, in print or in person (ie on a conf call with them).    For example, the investment firms put out analyst notes all the time.  They can be bullish or bearish.  None of that is what I'm talking about.    He didn't put out a bearish call or claim that the company is overvalued, etc.   He accused them of fraud which means they are worth ZERO, and he says they need to be shut down by the SEC.    As Icahn said, if this guy wants to be an investigator let him go submit his resume to the SEC, but that's not the job of hedge fund managers.   It is the SEC's job to determine who is in compliance and who is breaking the law.    This is way different than simply a guy taking a short position then explaining his case to investors why he thinks the stock will go down.     And of course the shameless self-promotion that went along with it in this case - par for the course for an egomaniac.

There is no ethical difference between making a case for a long position you already took or to a short position. In the case of long position funds are required by law to disclose holdings in a company that are beyond a threshold of 5% of the market capital.

See above.

I also read the case that Ackman presented and it is a very straight forward sensible factual detailed report that proves Herbalife is a scam.

LOL yes it is very straight forward because he only presents one side of the story.   And no it does not prove anything, his report is suggestive of things that he is unable to prove (hence why he calls on regulators to investigate it).  But of course in being suggestive he is also selectively presenting the information to "pump" his trade, so none of this is an honest conversation about the HLF business tactics.

[Kahane-Was-Right BT]

BTW, Icahn reporting a 13% stake in HLF tonight.   lol. 

[Kahane-Was-Right BT]

BTW, it seems you are ignoring any information which contradicts ackman's portrait.   I have repeatedly said in this thread I know people who swear by these products and eat/drink them.    I also have personally met a few people who lost a huge amount of weight using these products.    They are convinced it's the products although I believe it's really the calorie reduction (in part, aided by the products) and the increased exercise (an exercise culture has been fostered in meetings/showcases - maybe it was a nutrition club, I'm not sure - at their distributor's location).    But they will continue to use these products due to their success.     And I can understand that.  That's like 'brand loyalty.'

Now here is more perspective on the "nutrition clubs" which Ackman highlighted in his presentation (I have also looked through it, although I don't remember if I got all the way to the end, but I did read most of his presentation a while back).

http://brontecapital.blogspot.com/2013/01/notes-on-visiting-herbalife-nutrition.html

Not quite how Ackman presents it eh?

You see, if I'm short a stock to the tune of hundreds of millions, it's very easy to pick a nutrition club that is not active (or maybe at a time when they don't typically gather or don't usually have much activity) document its flaws, present it in a negative light and then pretend that all the nutrition clubs are exactly the same way.   That's called preaching your book.    Pumping your trade.   Whatever you want to call it.  Ackman is not out to save people or help failed HLF distributors.   He is out to make money.  All trades are made to make money.    And as Jim Cramer himself once explained (in a famous youtube clip bandied about the internet nowadays) manufacturing a "story" is all part of the hedge fund game in trying to move the stock prices.    The "this is fraud, I'm a policeman and I call for investigations now, this is going to 0" scare tactics and circus act is just Ackman manufacturing his story.

[muman613]

What about Liver Damage? Apparently the products are not safe for human consumption as there is evidence that some products increase the cases of liver damage in those who consume them...

http://en.wikipedia.org/wiki/Herbalife

Herbalife and liver disease

In 2004 Israel's Health Minister began an investigation against Herbalife's products after four persons using Herbalife's products were found to have liver problems.[38]

Herbalife's products were accused of containing toxic ingredients such as Qua-qua, Kompri, and Kraska. The products were sent to the Bio-Medical Research Design LTD (B.R.D) laboratory, to a private laboratory in the United States of America, and to Israel's Forensic research laboratory. The company issued a press release stating that the Israeli government, and scientists working with Herbalife, were unable to establish a link between the product and the eight cases of liver damage. Herbalife withdrew the product, which was only marketed in Israel.[39] Herbalife's SEC 10-Q filings state that the Israeli Ministry of Health did not establish a causal relationship between the product and liver ailments. The Israeli Ministry of Health advises individuals with compromised liver function to avoid dietary supplements.[40] In 2009, an Israeli woman sued Herbalife International and Herbalife Israel, claiming that her liver damage resulted from the use of Herbalife products.[41]

Scientific studies in 2007 by doctors at the University Hospital of Bern in Switzerland and the Liver Unit of the Hadassah-Hebrew University Medical Center in Israel found an association between consumption of Herbalife products and hepatitis.[38][42] In response, the Spanish Ministry of Health issued an alert asking for caution in consuming Herbalife products.[43] Herbalife has stated they are cooperating fully with Spanish authorities.[44]

By 2011, hospitals in Israel, Spain, Switzerland, Iceland, Argentina and the United States had reported liver damage in a number of patients, part of whom had used Herbalife products.[38][42][45][46][47][48][49][50][51][improper synthesis?] Some patients recovered after they had stopped taking the products, in others the disease continued, and two patients died. Several authors considered it plausible that Herbalife products were the cause of the observed liver disease. Herbalife employees claim there is no definitive proof that Herbalife products cause hepatoxicity or other liver problems.[52]

And there is an ongoing investigation into whether it is a pyramid scheme (which it appears to be to me):

Pyramid scheme allegations

In November 2011, the Commercial Court in Brussels, Belgium ruled that Herbalife was an illegal pyramid scheme.[4]

Herbalife responded to the Belgium decision by stating "Herbalife believes the judgment contains factual errors and is based on misinterpretations of the law and its direct-selling sales model. Herbalife remains committed to its multi-level direct-selling sales model and is confident that, with clarifications in certain aspects of its business, there will be no doubt as to its compliance with all applicable Belgian laws."[73]

On December 20, 2012, Bill Ackman (of Pershing Square Capital) presented a series of arguments outlining why his firm believed that Herbalife operates a "sophisticated pyramid scheme".[6][7] Ackman has alleged after a year-long investigation that the majority of distributors lose money, that the chance of making the testimonial-implied headline income is approximately one in five thousand, and that the company materially overstates its distributors' retail sales and understates their recruiting rewards, to the point that he concludes it is a pyramid scheme.[74]

Ackman claimed that Herbalife distributors "primarily obtain their monetary benefits from recruitment rather than the sale of goods and services to consumers." His firm estimates that, since 1980, the scheme has led to more than $3.5 billion of total net losses suffered by those at the bottom of the Herbalife chain.

According to a number of financial commentators, Ackman put on a roughly $1 billion bet against the company;[75] soon after remarks to the press the price of the stock decreased such that Ackman would have made $300 million if he had closed his short position then.[76]

Herbalife Responded to Ackman's presentation saying "Today's presentation was a malicious attack on Herbalife's business model based largely on outdated, distorted and inaccurate information. Herbalife operates with the highest ethical and quality standards, and our management and our board are constantly reviewing our business practices and products. Herbalife also hires independent, outside experts to ensure our operations are in full compliance with laws and regulations. Herbalife is not an illegal pyramid scheme."[77]

The New York Post, through a Freedom of Information Act request, reported that HerbaLife is subject to a pending probe from the FTC. The FTC released 729 pages containing 192 complaints received over a 7 year period in regards to the New York Post FOIA request. After reviewing the now-public complaints, which the FTC put on its website, Ackman told The Post: “I have a lot more confidence in our government’s regulators than those who own the stock.” [78] The following day, the New York Post published a report that the FTC claimed that the wording the New York Post reporter interpreted to indicate that Herbalife "is the subject of a law enforcement investigation" was incorrect and said that it could not confirm, or deny, an investigation into the nutritional supplements company. [79]

[Kahane-Was-Right BT]

Here is some more perspective on Ackman's behavior and about his revealing response on CNBC to questions from Sorkin on FTC investigation.  (I actually wish I had read this sooner because I might have taken a long position -  I saw the interview at the time but didn't compute the "tell."   So obvious!)     Is it possible Ackman actually has already covered most or all of his short for profit?

http://thompsonburton.com/mlmattorney/2013/01/01/herbalife-why-i-made-it-a-35-position-after-the-bill-ackman-bear-raid/

[Kahane-Was-Right BT]

Muman, if you are going to read wikipedia to inform your opinion on a subject, you might as well read ALL of the wikipedia page.   Did you read this part? 

"Barry Minkow

In May 2008, the now defunct Fraud Discovery Institute,[26] which claimed to be a consumer watchdog organization, reported that laboratory test results of Herbalife products showed lead levels in excess of limits established by law in California under Proposition 65.[27][28] The Fraud Discovery Institute was founded by Barry Minkow, who served seven years in jail for stock fraud,[29] and since disclosed that his company was profiting from the allegations by shorting Herbalife stock.[30] Herbalife responded stating its products met federal FDA requirements[31][32] and released independent laboratory tests it said proved the products did not exceed Proposition 65 limits.[30]

On May 10, 2008 a suit was filed on behalf of a woman who developed lead-related liver complaints that she claimed were a reaction to a combination of Herbalife products.[29][33] The suit was filed by lawyer Christopher Grell, cofounder of the Dietary Supplement Safety Committee and an associate of Barry Minkow.[29] On June 17, 2008, the suit was expanded to add distributors who had supplied the woman with the Herbalife products, with Grell launching a website to offer persons who believe they were harmed by Herbalife products the chance of redress.[34] In August 2008, Minkow retracted all accusations against Herbalife and removed any mention of the company from his web site.[35] According to court documents, Herbalife settled with Minkow for $300,000.[36]

In 2011, Minkow started serving a 5-year federal prison sentence for securities fraud after pleading guilty to one count of conspiring to damage Lennar Corp. by attacking the Miami-based home builder in reports he acknowledged were filled with falsehoods.[37]"

The liver issue appears not to be definitive. 
All supplements have dangers.  In my opinion, no one should take any supplements.  I personally do not and never have taken dietary supplements.    It's like a medicine only without the same regulation in place.  And medicines have rare side effects at times too.  But these haven't been tested rigorously like medicines have to establish that knowledge.      However, all this is besides the point.     None of this makes HLF a fraud.   And in all cases, it appears they have cooperated with the authorities in question.

[muman613]

Muman, if you are going to read wikipedia to inform your opinion on a subject, you might as well read ALL of the wikipedia page.   Did you read this part? 

The liver issue appears not to be definitive. 
All supplements have dangers.  In my opinion, no one should take any supplements.  I personally do not and never have taken dietary supplements.    It's like a medicine only without the same regulation in place.  And medicines have rare side effects at times too.  But these haven't been tested rigorously like medicines have to establish that knowledge.      However, all this is besides the point.     None of this makes HLF a fraud.   And in all cases, it appears they have cooperated with the authorities in question.

I am just learning about this situation and I have read that article about the Minkow allegations (which were deemed false)...

[Zelhar]

The only way to make money as a distributor is by recruiting other suckers as distributors. No one can make money from selling puke shakes to end consumers because no end consumer needs to pay retail price to buy their puke shake. There are just too many failed distributors dumping their unwanted merchandise on eBay and quite likely other close bye who would sell it at a loss just to get read of the stock.

Is there any incentive to become a "distributor" just so you can purchase the product at discount for self consumption ? I think not. First, you can buy it at a similar discount on eBay or from failed distributors trying to get reed of their stock. Second, a distributor must buy boxes of the puke shake, much more then any one person would want to drink, especially one who tries to lose weight.

Another issue is that their puke shake is allot more expensive then similar products, which are actually brands promoted for retail consumption and sold at retail outlets. I don't know anyone who buys (or try to sell) Herbalife even though I know they exist here in Israel too, praying on poor and unemployed people to become distributors and get rich. They advertise themselves in job seeking boards falsely presenting themselves as trying to recruit employees while in fact they are recruiting suckers.

The fact is they are doing now most of their money by hassling poor Hispanics and other minorities of lower income levels. Do you think these people always buy the highest priced "premium" product on the market ? Why is it that they buy Herbalife then more then all its competition combined ? Herbalife "sells" $2 billion of puke powder, which is over 10 times the sales of all the competition in the powder category combined. And that's while Herbalife focuses on lower class consumers, mainly Hispanics, and only sells through distribution channel without retail outlets, without promotion for the product itself. And their retail price is 2-3 times higher then most of the competitors.

---
Now regarding Ackman- he is not a hero and I never said he was righteous. I assume he is in on this for the money, it doesn't matter if he said he donated his personal gain from this trade or if he said he was going to buy a gold plated Lamborghini out of it.  Lets assume he is in it for the money and he wants to win. The facts are still facts.

[Zelhar]

Here is some more perspective on Ackman's behavior and about his revealing response on CNBC to questions from Sorkin on FTC investigation.  (I actually wish I had read this sooner because I might have taken a long position -  I saw the interview at the time but didn't compute the "tell."   So obvious!)     Is it possible Ackman actually has already covered most or all of his short for profit?

http://thompsonburton.com/mlmattorney/2013/01/01/herbalife-why-i-made-it-a-35-position-after-the-bill-ackman-bear-raid/

Does any of it change the fact that Herbalife is a scam ? You can have a very profitable and long lasting scam. Their profits are real and their revenues are real, it's the methods they use to earn them that are a fraud.

I think that their scam is not technically a pyramid scam in the classical sense and that's why it is long lasting and that's the criminal brilliance in this scam. But you know, the Nigerian sting has also been around for decades and it too never runs out of suckers, but it is still a scam.

BTW, it seems you are ignoring any information which contradicts ackman's portrait.   I have repeatedly said in this thread I know people who swear by these products and eat/drink them.    I also have personally met a few people who lost a huge amount of weight using these products.    They are convinced it's the products although I believe it's really the calorie reduction (in part, aided by the products) and the increased exercise (an exercise culture has been fostered in meetings/showcases - maybe it was a nutrition club, I'm not sure - at their distributor's location).    But they will continue to use these products due to their success.     And I can understand that.  That's like 'brand loyalty.'

Now here is more perspective on the "nutrition clubs" which Ackman highlighted in his presentation (I have also looked through it, although I don't remember if I got all the way to the end, but I did read most of his presentation a while back).

I personally don't know anyone who ever used their puke shake or any other product. I suspect the people whom you know are or used to be recruits so they swear by it because they are trying to recruit others or they are to ashamed to admit they are victims of this scam.

The typical victim of their scam is underemployed or unemployed person of lower income classes, mainly minorities. The people you know probably don't belong to this category and represent a tiny negligible market. The fact is they hardly have any end consumers, and unemployed poor people don't become distributors because they want to personally consume the puke shake at a discount price (which is still much more expensive then similar alternative brands). They join because they are duped to believe they can make a profit by recruiting more distributors, they only focus on getting new distributors and not on actually selling their crap for consumers.

I also don't buy the theory that Herbalife is a weight losing club like AA for alcoholics. If they were they would have to advertise themselves as such, and they would have to name wight watchers etc. as their main competition. Instead they actually compare themselves to McDonalds in their own presentations. More important, their victims don't join the scheme because they want to lose wight, they join because they are duped to believe they can make easy money.