After Big Bet, Hedge Fund Pulls the Levers of Power

[cvictorg]

http://www.nytimes.com/2014/03/10/b...ackman-lobbying-to-bring-it-down.html?hp&_r=0

At a Midtown Manhattan steakhouse last June, William A. Ackman, the activist hedge fund manager who had bet a billion dollars on the collapse of the nutritional supplement company Herbalife, offered his latest evidence to a handful of other hedge fund managers about why the company’s stock could soon plummet.

Mr. Ackman told his dinner companions that Representative Linda T. Sánchez, Democrat of California, had sent a letter to the Federal Trade Commission the previous day calling for an investigation of the company.

The commission had not yet stamped the letter as received, nor had it been made public. But Mr. Ackman, who had personally lobbied Ms. Sánchez and stood to profit if the company’s stock dropped as a result of the call for an inquiry, already knew what it said, and read from a copy of it that he had on his cellphone.

When Ms. Sánchez’s office ultimately issued a news release a month later, it was backdated as though it had been made public the day before Mr. Ackman’s dinner talk.

Representative Linda T. Sánchez, Democrat of California, sent a letter to the F.T.C. asking it to investigate Herbalife. Mr. Ackman obtained a copy of the letter before it was made public.

The letter was a small hint of Mr. Ackman’s extraordinary attempt to leverage the corridors of power — in Washington, state capitols and city halls — for his hedge fund’s profit after taking a $1 billion financial position called a short, a bet that will pay off only if Herbalife’s stock drops.

http://www.nytimes.com/interactive/2014/03/10/business/10ackman-herbalife-documents.html

 

[Voltrader]

All was good until Icahn stepped in and put a whooping on Ackman's position. Ackman you want to talk about a shill. The fact he had inside leverage too....really makes Ackman look like a !@$head. He will be having to head over to Jersey soon to eat his steaks.[)]

 

[nuncaquite]

It's fkn amazing how big Herbalife is. Even 3rd world countries have huge sales, or the appearance of huge sales. They have beautiful headquarters is some shithole countries.

 

[Voltrader]

HLF- Down 27 bucks off its high trading at $58.69 down -6.88 today afte FTC Inquiry. Maybe Ackman the Hack pulls this off. I doubt Icahn will let that happen. This story is one of the most interesting ones to follow been following it for a year it kinda mirrors some threads that go down in here.

 

[cvictorg]

Herbalife wilts on news of FTC investigation

FTC Launches Herbalife Inquiry, Shares Fall - Forbes
For more than a year, hedge fund billionaire William Ackman has been calling on the federal government to shut down Herbalife because it is a pyramid scheme. He has called press conferences. He has lobbied in Washington. He has issued enormous slide presentations. He said he would go to the “end of the Earth” to defeat the company. But the stock of Herbalife kept going up.

Ackman won an important victory on Wednesday, when Hebalife disclosed it had received a civil investigative demand from the Federal Trade Commission. Shares of Herbalife fell by 8% to the $60 range after being halted before the news was announced.

Despite being a seller of diet shakes, Herbalife has been at the center of one of the biggest Wall Street dramas in recent years. Carl Icahn, the richest trader in New York, took a large stake in the company. Icahn and Ackman are long-time enemies. William Stiritz, the CEO of Post Holdings, has also become a big shareholder in Herbalife and defended the company against Ackman’s criticisms. Even George Soros took a large stake in the company, but he trimmed much of it by the end of 2013.

http://www.reuters.com/article/2014/03/12/us-herbalife-ackman-idUSBREA2A1VC20140312
Hedge fund manager William Ackman renewed his attack on Herbalife on Tuesday and said he has evidence the U.S.-based nutrition and weight loss company is breaking direct-selling laws in China, its fastest growing market.

Ackman, who has placed a $1 billion short bet against Herbalife, said the company was making recruits pay an entry fee and letting distributors recruit new members, activities he said were illegal in China. He also said the company is disguising its sales to distributors as hourly consulting fees.

Herbalife said it follows local laws. Chinese regulators have yet to comment on the matter but direct sales models have recently come under fire in China, where authorities launched a probe in January into Herbalife's rival NU Skin Enterprises Inc after state media reported that it brainwashed its members.

In a telephone presentation which lasted more than two hours and drew some 300 listeners, Ackman said the findings were a first step towards bringing his concerns about Herbalife to the attention of Chinese officials.

Ackman, who heads Pershing Square Capital Management, hired research firm OTG to collect the evidence through interviews with Herbalife distributors in China. He was joined on the conference call by one of his lawyers, David Klafter, who said Herbalife is violating Chinese law.

"My understanding of the facts and law in China is yes, they are violating both civil and criminal law," Klafter said on the conference call.

Legal experts in China, however, say laws governing direct selling are unclear and enforcement is often lax, which makes any tough regulatory action against Herbalife unlikely.

Some Chinese laws allow direct selling under limited conditions, while others ban so-called pyramid selling, when members make more money recruiting new members than selling the actual product.

"These firms are operating in a regulatory grey area in China, which gives less protection because you've got an uncertainty hanging over it," said Ben Wootliff, Hong Kong-based general manager for global risk consultancy Control Risks.

"The law in China says one thing, if it's actually enforced is a completely different thing."

Corey Lindley, chief cfinancial officer at direct sales firm d?TERRA and a former NU Skin executive in China, also said the regulator was unlikely to take strong action against Herbalife any time soon.

"I don't doubt that because of all of this attention there will be some modest movement of some sort with the regulators just trying to be responsive to all of this, but I don't think it will be material at all," Lindley told Reuters.

Herbalife said sales in China rose more than 120 percent in the fourth quarter of 2013, the fastest of any region worldwide, contributing about 10 percent to global sales last year. The company has 200,000 sales representatives in the country and uses a "unique marketing program" to meet Chinese regulations, it said in its latest annual report.

Herbalife has said it remains confident in its business in China and said it is in compliance with local laws.