Bill Ackman in December made a long presentation claiming that Herbalife is a pyramid scheme.
On 10-JAN-2013 Herbalife made a formal press conference issuing rebuttals to Ackman's points. I am working off summary as published on Seeking Alpha so any misinterpretation would be mine, as I'm not working from the source material itself.
Friday, January 11, 2013
|Herbalife product brochure Cover |
GR Greece Ellas Ellada
(Photo credit: www.goherb.eu)
Instead of checking each and every point that Ackman and Loeb had made, I'll just go over Loeb's rebuttal. It can be read in full here:
https://thompsonburton.box.com/shared/i58pby20vijey3n3g2ad (Thanks to "The MLM Attorney" Kevin Thompson's hosting )
Here's an excerpt from it, which is most of the counter argument.
The short seller’s lengthy argument against the Company can be boiled down to three principal smoking guns: the first, a claim that Herbalife has been operating an “illegal pyramid scheme” under the nose of the Federal Trade Commission for the past 32 years; the second, that Herbalife’s loyal customer and distributor base has been exploited and harmed despite the low number of consumer complaints and generous company return policies; and the third, a claim that Herbalife’s products are commodities sold at inflated prices not supported by sufficient levels of advertising or R&D.
Taken in reverse order, the third claim misses an essential truth that invalidates the indictment. No one believes Starbucks is a scam because you can buy a cheaper cup of coffee at your local bodega. A key contributor to Herbalife’s growth has been its distributor-led “Nutrition Clubs”, where consumers can purchase single servings of the Company’s signature beverages. The short seller’s assertion ignores the significant value customers place on every consumer brand and its community “experience” – whether at a Herbalife Nutrition Club, a Starbucks, or a corner bar. The markup is merited by community and brand identity, not by the commodity itself.This counter-argument somewhat sidestepped Ackman's actual point... Ackman did not say Herbalife did not advertise. In fact, several of the slides shows Herbalife ads, as Herbalife sponsors David Beckham, Formula One cars, and more. However, is it enough? Ackman's presentation actually compared Advertising and R&D budget as quoted from Herbalife's balance sheets to companies of similar size and industry (as well as those NOT in the same industry), and Herbalife STILL fell short. Furthermore, what good is brand recognition if this stuff is NOT sold at retail? It's almost as if Loeb just constructed a strawman argument and defeated it.
However, I do acknowledge that this is a good argument... that it *could* be argued that the product is NOT overpriced... or it *is* overpriced but it's NORMAL for the nutra-ceutical industry. It is needed to support the margins to do MLM payout.
Strangely, this seems to be the best argument, as the next two are weaker.
Thursday, January 10, 2013
|Herbalife product brochure |
Cover RU Russian Federation
(Photo credit: www.goherb.eu)
While this is only starting, this adds pressure on Herbalife, which already faced verdict of "pyramid scheme" in Europe.
William Ackman, in December 2012, had made a case with 300+ panels presentation, that Herbalife is a pyramid scheme, not MLM. Herbalife responded by "we are contemplating legal action".
While there's no way to know which way is SEC going to rule, as it'll be months before any results come out, this will add pressure on Herbalife to either open its books and show things it may not want to show, or lead to further airing of dirty laundry and further taint the reputation of MLM.
Wednesday, January 9, 2013
Scams *cost* you money, instead of paying you money
They always have an excuse... it's for supplies, it's for lessons, it's for a special insider info, it's to see if you're serious, blah blah blah. You WORK FOR MONEY. You're NOT in the business of PAYING money to earn money. That's called an "investment". If you are asked to pay money to earn money, run away!
Scams usually do High-Pressure Pitch, Time-Limited Offer, Buy Now!
Scams want your money now. The more you think about it, the less likely scam is like to succeed, thus scams will always make their stuff look good, then use high pressure sales tactics on you with "time limited bonus" and such, to force you to commit now, which makes no sense in a business. Why is this thing time-sensitive any way? Scams and fads are time-sensitive. A real opportunity is not. Avoid the hardsell and artificial time pressure!
Tuesday, January 8, 2013
|Can you "win" iPad for $25? Only when hundreds of others lose dozens or hundreds.|
Image via CrunchBase
1. Penny auctions: The online penny auction Zeek Rewards was shut down this year as a Ponzi scheme. TIPS: Pay attention to details in signup, annual fees, minimum bidding requirements, maximum prizes and refund details.
Technically Mr. Hicken's tips will only help if you're simply bidding, not being an income-opportunity affiliate (which is a whole different "ball of wax", so to speak, but it's not a bad place to start.
What's worse, the whole penny auction industry itself is misleading.
Monday, January 7, 2013
|http://openclipart.org/clipart/people/magnifying_glass_01.svg License: PublicDomain Keywords: people Author: AbiClipart Title: Magnifying Glass (Photo credit: Wikipedia)|
Apparently, the biz closed back in July when a grand jury allowed the forfeiture case to proceed against various properties and corporate entities held by Calhorn. And he was arrested last month on racketeering charges by Florida. Forfeiture case seem to be linked to "access device fraud", which usually means credit/debit card terminals and possibly identify theft. There are also references to wire fraud and conspiracy, both are Federal crimes.
Sunday, January 6, 2013
Sometimes, people just behave so idiotically you wonder if they were taking drugs or had a mental breakdown, but they are clearly lucid.
She knows what securities are, and SEC does not.
Many such examples exist for the Zeek Rewards Ponzi.
In an article published 20-DEC-2012 in The Dispatch of North Carolina, one Zeek affiliate Basinger, who was employed as "Law Firm Administrator" (i.e. head secretarial staff) claim that she knows what securities are, and SECURITIES EXCHANGE COMMISSION does not.
Basinger strongly disagrees with the SEC's action.
"Zeek Rewards wasn't a Ponzi," Basinger said. "I think this whole thing is a big misunderstanding. I bought bids that were given away to people participating in the penny auction. I never bought a security — I know what those are."