It’s time again to renew our interest in this non-story. Herbalife (HLF) against the world.
Now that the short-squeeze is over and Bill Ackman’s equity investment has been transformed into a derivatives investment, he can manage his losses as, “the cost of doing business” against Carl Icahn. They both probably have nothing better to do. Wouldn’t there be more productive uses of capital. I know a few… Seriously!
As you’ve probably heard the FTC is launching a civil probe into Herbalife’s practices. Though the results of that probe might take a year or two, the expectations are already being communicated (Bloomberg).
The investigation will most likely end with Herbalife intact while paying a “palatable fine” and agreeing to stricter controls on its multilevel marketing structure, said Robert Chapman, founder of hedge fund Chapman Capital LLC in Manhattan Beach, California. Chapman, who has been critical of Ackman, owns Herbalife stock and bullish derivative options.
And on the other side of the isle, the obligatory lobbying…
The FTC, along with the U.S. Securities and Exchange Commission, had been asked by SenatorEdward Markey, a Massachusetts Democrat, to look into Herbalife’s business practices. An advocacy group called the League of United Latin American Citizens also has met with FTC Chairwoman Edith Ramirez to describe alleged abuses by the company. Ramirez told Markey in a letter last month that his concerns were being “carefully considered.”
The New York Times reported this week that Ackman had donated $10,000 to the advocacy group and hired a former aide to Markey as part of his anti-Herbalife campaign.
I’d bet $10,000 only scratches the surface.
This got me thinking of the irony of the argument. The League of United Latin American Citizens is challenging Herbalife because the Hispanic community is unfairly being targeted by Herbalife; a pyramid scheme praying on the local hard-working community. Shame, though you would find the same behaviour at Anheuser-Busch InBev. Hypocracy aside.
In their own words (here),
The League of United Latin American Citizens, this nation’s largest and oldest Hispanic civil rights organization, welcomed the news that the Federal Trade Commission (FTC) has opened a formal investigation of Herbalife’s business model.
LULAC has maintained that the company has been defrauding hundreds of thousands of their own distributors by promising a lucrative business opportunity when the vast majority suffer financial loss.
Now my confusion Here’s a financial whale in a billion dollar pissing match, paying a lobbyist to convince the FTC that HLF is praying on the small guy – which is illegal – while the very act of paying this lobbyist to move the FTC, prays on ME – which is in NO WAY illegal.
I’m not Hispanic and I don’t buy or distribute Herbalife, but I do buy stocks, futures and derivatives. I want to believe that financial products, serve a valuable purpose, and speculating pits my capacity to measure opportunity against the traders at funds like Pershing Square or Chapman Capital.
I’m clearly holding on to a naive notion. Good Trading