Bill Ackman’s Persistent Lobbying Efforts Pay Off

This week was looking like one that Bill Ackman would want to forget. It began with a New York Times article that read like something Herbalife CEO Michael Johnson and Carl Icahn might have collaborated on. It continued with yesterday’s $300 million Fannie Mae/Freddie Mac hiccup. Even Ackman’s latest presentation on what he very sincerely hopes is a pyramid scheme, accusing Herbalife of breaking Chinese laws, failed to either lift his spirit or dent its stock price. But this has definitely accomplished the latter, and almost certainly the former.

Herbalife Ltd., the nutrition company that hedge fund manager Bill Ackman has accused of being a pyramid scheme, disclosed that the U.S. Federal Trade Commission has started a civil probe into its practices.

Herbalife fell 7.5 percent to $60.46 at 3:19 p.m. in New York and earlier slid as much as 17 percent for the biggest intraday drop since Dec. 21, 2012. Through yesterday, the shares had gained 54 percent since Ackman first made his accusations.

The probe marks an achievement for Ackman, who in 2012 made a $1 billion bet against Herbalife’s shares and started working to persuade regulators to shut the company down, saying it misleads distributors, misrepresents sales figures and sells a commodity product at inflated prices. The company has repeatedly denied Ackman’s allegations and won allies including billionaire Carl Icahn.

“Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace,” the Cayman Islands-based company said today in a statement. “We are confident that Herbalife is in compliance with all applicable laws and regulations.”

Herbalife Discloses Civil Investigation by FTC [Bloomberg]

21 comments (hidden to protect delicate sensibilities)
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Comments (21)

  1. Posted by Guest | March 12, 2014 at 4:53 PM

    How many other businesses should be scared by this attack on Herbalife's business model? Cosmetic firms, Brokerage firms, mobile phone companies, Gym memberships, insurance brokers….

  2. Posted by Guest | March 12, 2014 at 4:53 PM

    If at first you don't succeed, rent-seek.

  3. Posted by Guest | March 12, 2014 at 4:53 PM

    Now that's bullying, Charlie. Look and learn.

  4. Posted by UBS Fear Quant | March 12, 2014 at 5:03 PM

    How many other businesses should be scared of your selective capitalization practices?

  5. Posted by Pyramid Junkie | March 12, 2014 at 5:13 PM

    Bill, I'd like to have you over for dinner. I want to talk to you about something. I promise, its not Amway. OK. actually it is Amway.

  6. Posted by Guest | March 12, 2014 at 5:14 PM

    Ackman 1 – Icahn 0

  7. Posted by Ahmad PO | March 12, 2014 at 5:27 PM

    Kudos to Mr. Ackman (and I ain't talking about the Kudos candy bar), anytime there is trouble its casued by Moslims. Well, Mohammad Bin Herbkhalfia isn't getting away this time.

  8. Posted by Guest | March 12, 2014 at 5:31 PM

    Hedge fund marketer says what?

    I shouldn't make fun of them. It's not easy to try to convince people that hundreds of millions of losses (before AUM fees…) = victory.

  9. Posted by guest | March 12, 2014 at 5:32 PM

    pretty sure Icahn has some points on the board – go look at the stock price.

  10. Posted by Guest | March 12, 2014 at 5:38 PM

    What's Ackman's average short price, $45? $40? And he's been riding it for over a year?

  11. Posted by Guest | March 12, 2014 at 5:42 PM

    Bill, maybe you should look into these analytics: http://www.bloomberg.com/news/2014-03-11/traders-

    Traders Beat Market Indexes Borrowing Tools From Sports

  12. Posted by William Notakman | March 12, 2014 at 6:57 PM
  13. Posted by Steve | March 12, 2014 at 7:23 PM

    Does anyone know how much Ackman contributes to our esteemed politicians?

  14. Posted by Dad | March 12, 2014 at 11:24 PM

    Since he rolled his short into the dated OTM puts, it's safe to say he's still heavily in the red and will be for some time. Seeing how ad hominem this has become I wouldn't be surprised to hear another buyback auth announcement in the near future. Bottom line is the business is generating cash flow (unless their auditors have the competency a certain Arthur Andersen partner), and HLF doesn't go to zero. Without the name going to zero completely, Ackman takes the loss and the tears flow.

  15. Posted by Disgruntled PSCM guy | March 12, 2014 at 11:25 PM

    Ackman=scumbag

    How many millions has he spent bribing–er, I mean lobbying–politicians and regulators in DC?

    Hasn't had a single good investment idea since Canadian Pacific, and that was three years ago.

    Dude should return investors' money and go find a rock to crawl under.

  16. Posted by Another guest | March 13, 2014 at 8:55 AM

    More like it has been riding him for over a year…

  17. Posted by LULAC-bought-out | March 13, 2014 at 9:21 AM

    On Tuesday and Wednesday, WHAckman lost $400.7 MM on Fannie and Freddie. Herbalife would have to fall a lot further to come close to offsetting that alone.

  18. Posted by Guest | March 13, 2014 at 10:56 AM

    Best comment so far

  19. Posted by Equivocation | March 13, 2014 at 11:32 AM

    Actually it does go to zero. That is the whole point of being investigated as a pyramid scheme. Or do you really believe Herbalife brand is worth anything.

  20. Posted by Latino Flavor | March 13, 2014 at 7:42 PM

    I'm really glad I live in a country where well-connected malcontents can deploy the regulators against their business rivals.

    All we need now is a $15 minumum wage and hordes of poor people occupying public areas!

  21. Posted by محرر الصور للاندرويد | March 16, 2014 at 6:14 PM

    Bottom line is the business is generating cash flow (unless their auditors have the competency a certain Arthur Andersen partner), and HLF doesn't go to zero. Without the name going to zero completely, Ackman takes the loss and the tears flow.