“Substantial economic injury.” “Will have to compensate consumers for the losses they have suffered.” Hasn’t been making “truthful claims about how much money its members are likely to make.” These are not some of the snippets Alec Baldwin’s guests enjoyed while taking in a screening of Bill Ackman’s latest Herbalife video. These are the words of the head of the U.S. Federal Trade Commission, coming down hard on the diet-shake maker/alleged pyramid scheme. She continued, “Herbalife is going to have to start operating legitimately.”
Celebrations over at 888 Seventh, to be sure. I mean, just yesterday, anticipating that the long-rumored Herbalife-FTC deal would be coming down, Ackman even stepped back from his maximalist position, articulated way back in December 2012, that the FTC would shut Herbalife down and its stock—of which he was shorting $1 billion, at a cost of $20 million a year—would go to zero.
"I think this is going to end up with the government suing Herbalife for being a pyramid scheme, or Herbalife capitulating and agreeing to changes, and in either circumstance the stock's not going to be $60 a share," he said.
Unfortunately for Ackman, who could really use the help, apparently no one takes the FTC and its $200 million fines any more seriously than they do Ackman on the subject of Herbalife. Strictly speaking, Ackman’s right: Herbalife is not a $60 stock. Thanks to the FTC tongue-lashing, it’s almost a $70 stock.
Herbalife shares jumped more than 15 percent in the first hours of trading, most recently trading around $68.50. Shares are up more than 22 percent over the past six months.
Unlike many of those that “shorted” Herbalife, we did not rely on one or two research papers prepared by non-experts. As a result of our research, over three years ago we concluded that Herbalife was not a pyramid scheme. The FTC settlement announced today, coming after a two-year investigation also concluded that Herbalife is not a pyramid scheme – a conclusion that obviously vindicates our research and conviction. While Bill Ackman and I are on friendly terms, we have agreed to disagree (vehemently) on this subject. Simply stated the shorts have been completely wrong on Herbalife.
Herbalife Settles Pyramid Probe as FTC Seeks Major Changes [Bloomberg]
Herbalife to Pay $200 Million Over Claims of Misrepresentation [WSJ]
Herbalife settles pyramid scheme case with regulator, in blow to Pershing’s Ackman [Reuters]
Bill Ackman is taking a beating over the Herbalife ruling [CNBC]
Carl Icahn Issues Statement In Response to Herbalife’s Settlement with the FTC [CarlIcahn.com]