Ackman still short 20% of the float. Icahn is now joined by Soros with large long stakes
Any opinions on how you see this getting played out through the rest of the year?
Icahn was just being a bully but now that Soros has joined the picture, I agree with the others that Ackman is royally screwed. Ackman is just better off buying OTM calls and exercising them like Ichan did instead of trying to cover his short. Wouldn’t that prevent a short squeeze and limit Ackman’s losses? Who knows if he hasn’t already done that?
I have no position (never have) but I look at a lot of fraudulent companies. I glanced at this one during the Icahn - Ackman smack down and seem to recall reading that the SEC previously looked at HLF and did nothing. I think it was a while ago but if I read correctly, they looked specifically at the multi-level marketing business model.
If that’s true (I forgot the details already), then to be short this stock, you have to believe that Ackman is going to convince the SEC to do something different this time. Most likely, the SEC is too busy looking at porn and wasting taxpayer money, and frankly, it probably couldn’t do anything anyway without appearing to have bent to Ackman’s will (bad politics, which is the last thing the SEC needs more of).
Who knows what will happen, but I think you have to assume this is a going concern and value it on the substantial free cash flow the company produces, which appears to be what the market is doing.
The problem with frauds is that some large portion of the market doesn’t do real work in researching companies and largely just chases earnings (IMO, the market is VERY efficient at pricing short-term earnings changes but is pretty horrible at pricing long-term business changes). That means if the earnings are good, the stock will go up even if it is a total fraud. To be short fraud, you have to short at a high valuation on the cusp of deteriorating earnings or the implosion of the fraud, otherwise they can persist for years.
While looking at HLF I noticed that a lot of the other non-cyclical consumer goods sector companies were up ridiculous amounts this year as well. (YTD, according to google finance) HLF: +100% NUS: +136% - Nu Skin Enterprises, “a global direct selling company with operations in 53 markets worldwide. The Company develops and distributes anti-aging personal care products and nutritional supplements under its Nu Skin and Pharmanex brands” USNA: +142% - USANA Health Sciences, Inc. “develops and manufactures science-based nutritional and personal care products. The Company has operations in 15 markets worldwide, where it distributes and sells its products by way of direct selling.” RELV: +122%, MTEX: +143% etc etc Dat correlation? Coincidence? I didn’t look very deep. Didn’t check out the financial statements. Just curious.
Whether or not it meets a legal defintion, it’s a horrible deal for the vast majority of distributors. I don’t see how a company with such a model, legal or not, can be sustainable long term. However, this isn’t really about the long-term, is it?
I have a lot of respect for Ackman but I’m not sure he’s going to win this in the short term.
I’m not a big Ackman fan. He’s had some major flops that I think could have been avoided if he checked his ego. He doesn’t seem to be able to accept it when he’s wrong, and that should be a major red flag.
I have no idea if the company is a scam or not, but I don’t think Ackman is going to win this battle. On the surface, it seems like the only reason for the investigation is because Ackman asked his Senator buddy to suggest a FTC investigation, and they did as they were asked.
I just took a look through Ackman’s PowerPoint on the company… it’s a pretty damning case. That’s coming from someone that doesn’t really understand the sector or consumer goods companies much at all. But just based on what’s there, it looks bad.
Now whether that’s a “beyond a reasonable doubt” type case, I have no idea.
Yeah i’m listening to it whilst working, seems like they have done a ton of research on the inner workings of HLF, lots of detailed info on this 100 club and university.