A poster on the Yahoo message board for Usana Health Sciences provided this interesting analysis early this morning. I am putting in bold the most interesting parts….
Here is why I hope the “insider” is right that others are beginning to come forward: the company has been left with almost no assets after years of operations.
In many corporations, the stock of a company represents the value of the buildings, some patents, investments, etc. In Usana’s case, a lot of cash has come in the door. I’ll give them that. They know how to do this thing right, as Len would have the AG saying.
But what happened? The cash is gone because the officers cashed in a huge number of options at around 80 cents and sold for $50 to $60. The increased number of shares created would then dilute the earnings per share. So management (while selling their own shares) decided to use the company’s cash to buy those shares back.
How did this hurt associates? It was their money flowing in from required autoship in order to stay eligible for commission. If Usana would have deployed that cash to create unique products or make operations so efficient that the cost of the product decreased, then associates would have had an easier time building their business.
How did the stock buy back hurt other investors? Roughly 50% of the company’s owners didn’t receive stock options they could sell to take money out of the company. The profits of the company could have created unique products, made operations more efficient, OR paid a dividend to all holders of the stock or diversified the business.
The lone defender of this company, Mr. Len Clements, has very little credibility because he is selling a preposterous ION5 liquid in his own MLM venture that purports to have pain relieving properties and recuperative properties that go beyond mere vitamin supplementation. There is a testimonial to that effect on his very own web page as a distributor. But beyond his own web page, he is an officer and therefore responsible for the health claims of the product.
Mr. Clements claimed he just made a very good point on this message board. He claims Mr. Minkow’s report hurt thousands of people for thousands of dollars. If Mr. Clements is correct, that means that there have been autoship cancellations and new recruits are failing to sign up, all as a result of Mr. Minkow’s report. Stockholders would be hurt not by the draining of the cash by officers but by Mr. Minkow’s report causing a permanent impairment of Usana’s ability to recruit and sign up auto-ships.
So either Mr. Clements is aware of inside information that backs up his claim that business is down (because the company has not warned) or he is making a false claim that Mr. Minkow’s report has cost people money. He either knows or he does not know. Have autoships been cancelled? Is recruiting down? If that is true, Mr. Clements made a true point that Mr. Minkow’s report hurt small individuals.
I would then submit that Mr. Minkow’s report merely made information available. If that information would have been disclosed by the company itself, as is legally required, then the company would not have induced people into the arrangement who did not want to be involved.
If in fact, Mr. Clements is claiming Mr. Minkow has hurt people but business is not, in fact, impaired in any way, then Mr. Clements is wrong and the stock will surely recover to its former highs.
So Mr. Clements, if you are correct that this is a legal business and it will quickly recover its share price and autoship and recruiting ability, then you are incorrect that Minkow hurt anyone.
Your point that Minkow has hurt many is correct if you are incorrect that the business is legal. Minkow is the messenger that has delivered the required legal disclosure that the company is either a pyramid company or an undisclosed investment or a public company not meeting all of the SEC disclosure requirements.
Right or wrong, don’t kill the messenger.