Bill Ackman has spent the last five years trying to drive the supplement company Herbalife out of business.
He took a $1 billion short position in the company in December 2012, after which its stock dropped 10 percent in six seconds, which led to a temporary trading halt.
He informed investors at a 3 ½-hour slide show presentation in Manhattan that same month in which he plodded through a 342-slide presentation that characterized the company not as a multilevel firm that marketing energy and diet drinks, vitamins and skin products but as “the best-managed pyramid scheme in the history of the world.”
He leaned on friend Ed Markey, now a U.S. Senator from Massachusetts but then a member of the House of Representatives, to sic regulators on the firm. A lengthy investigation by the Federal Trade Commission led to a fine, some changes in business practices but, at the end, a clean bill of health for the company’s ways of doing business.
He has spent another $300 million to $400 million since to hire lobbyists, “alert communities,” such as Latinos, who have been drawn to the products for their benefits and the company for its offer of a hand up to the middle class, to the “dangers” posed. He has tracked down Herbalife employees and distributors to attempt to dig up dirt and has taken out ads, set up websites and taken other measures to find “victims” he can exploit in his Ahabian quest to bring down Herbalife.
He has even organized writers to produce pieces trashing the company and recommending on financial websites that its stock be sold, not bought, in an attempt to drive down its value.
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It’s not working. Herablife’s stock stood at $49 when trading was suspended. It’s now at more than $73 share and is going up.
The company’s stock reached all-time highs this spring and were looking to go even farther north. But in early June, it revised its expected earnings modestly downward, saying it expected revenue to fall 1.5 percent below earlier projections and sales to be down 3 percent as it dealt with regulatory changes brought on by the Federal Trade Commission. Its earnings-per-share estimates actually climbed both for the quarter and the year.
Here comes Ackman again. This time he has suggested Michael Johnson, the firm’s CEO, and other leaders sold their stocks at those highest-ever prices, which led to the downturn. He further suggested Mark Friedman, the company’s general counsel, left the company and Herbalife hid this and the departure of other executives, including the head of its China operations.
It’s time for Ackman to lay off. He’s had his day in court. The Federal Trade Commission has had its say – largely at his behest and thanks to his campaign contributions. This although Markey claims not to have known when he signed the letters urging investigation of Herbalife that Ackman was behind them or that he held a short position in the company. And although he praised Rep. Linda Sanchez, D-Calif., for sending other such letters on his behalf before those letters actually went out.
President Trump has positioned himself as the defender of America’s workers. Well, 8,000 of them are in danger of losing their jobs if one of Ackman’s punches actually lands. A $5 billion company that not only provides products for its customers but an opportunity for some to join its sales force would be no more if he had his way.
Ackman says he would not keep the profits from his short should he ever succeed in running Herbalife out of business – he calls this “blood money” and says he would donate it all to charity.
But what of those 8,000 workers and a company that sells 5,300 products in 91 countries and that even its lead regulator admits is operating ethically and legally? He’s already cost Herbalife more than $90 million to fend off his attacks, and it can expect to spend millions more with this latest fusillade.
Other investors see what Ackman is doing and shake their heads. Ackman claimed at one point Carl Icahn was willing to sell his shares in Herbalife to Ackman to drive down the price. Icahn not only denied it, he bought 2.3 million more shares and now owns about 35 percent of the company.
“It amazes me that a guy who hasn’t any knowledge of my internal investment thinking believes he is in a position to go on television and tell the world what I am thinking,” Icahn wrote. “Amazing! He has no right to do so, and even rose, I’m sure his unsubstantiated, obsessive comments, especially about Herbalife, have cost investors a great deal of money over the last few years.”
There have been too many costs associated with Ackman’s holy war on Herbalife. What he has paid. What the company has paid to defend itself. The stock might even be higher without all the interruption.
So again, it’s time for Ackman to finally tell us what this is truly all about and let us judge for ourselves. The government has had is say. If we the investing public find no more wrong than it did, then he needs to stand down and let those 8,000 people make a living.
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