Posts Tagged ‘bill ackman’

Herbalife Documentary by Herb Greenberg: Selling the American Dream

herbalife-selling-the-american-dreamHerb Greenberg, a stocks commentator for CNBC did a ten-month investigation of multi-level marketing company Herbalife. Its conclusion is this 20 minute documentary, and the timing couldn’t be better. Herbalife has been accused of being a pyramid scheme again, this time by Bill Ackman of Pershing Square.

Despite the fact that CEO Michael Johnson claims he’s never heard of Herbalife being referred to as a scam, there are plenty of people who will tell you different. This documentary is a very, very good piece and well worth the time to watch.

Is Herbalife a Scam?

Herbalife CEO Michael Johnson says he’s never heard anyone refer to HLF as a scam in the last ten years. Funny, but it seems the internet has heard such things. So much that Herbalife distributors write articles and produce videos that attempt to rank well in Google for the search phrase “herbalife scam.” If their pro-Herbalife  information is all that shows up when a potential distributor is searching for the truth about the company, the “negative” side will never be seen.

Thanks for this video, Salty Droid!

More on Herbalife, Bill Ackman, and Law Enforcement

As we patiently wait for Herbalife’s “analyst and investor meeting” on January 10 to address the pyramid scheme allegations made by short seller Bill Ackman, there is plenty of good discussion of HLF around the world wide web.

Kid Dynamite said Bill Ackman is wrong about Herbalife, citing that:

  • HLF  is not a pyramid scheme because commissions are paid based on sales of products, not recruitment (Wrong. Commissions are paid largely based on required minimum purchases of products by recruits.)
  • Herbalife has not committed accounting fraud in reporting their product sales. (I’m not so sure about that. The numbers as reported are deliberately and materially misleading.)

If Herbalife Was a Pyramid Scheme, It Would Have Collapsed By Now

herbalifeOne of the most common arguments used against those who deem multi-level marketing companies pyramid schemes, is that pyramid schemes collapse. Because Herbalife hasn’t collapsed, it must not be a pyramid scheme. Because the company has avoided total collapse for more than 30 years, it can’t possibly be a pyramid scheme. That is false, and I will demonstrate the falsity with the help of Bill Ackman.

Recruiting is the Name of the Game

A pyramid scheme has been defined as a scheme in which the participants obtain their monetary benefits primarily from recruitment rather than the sale of goods and services to consumers.

Bill Ackman on His Herbalife Short

Herbalife (NYSE: HLF) has been hit by a short seller again. Earlier this year it was David Einhorn simply asking questions about the business. This time it is Bill Ackman calling Herbalife a pyramid scheme and laying out his case.

Pyramid scheme allegations are nothing new. Each time, Herbalife vehemently denies it is a pyramid scheme, and says it’s a legitimate company, with legitimate products, and a legitimate business opportunity. It is this “business opportunity” that merits the pyramid scheme allegations.

Herb Greenberg of CNBC has been researching Herbalife for a long time. Back in May, Greeberg pointed out the reasons he thinks investors should worry about Herbalife:

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