Note: Below is a full transcript of an interview originally published on Jan. 10, 2013.
NEW YORK (
We've got two activist investors, Daniel Loeb and Bill Ackman going head-to-head on Herbalife. Ackman, first of all, is betting one billion dollars that this is a pyramid scheme. Is he onto something?
Well, look, I've had Herbalife's CEO, Michael Johnson, on Mad Money many times. And by the way, they continually made the numbers, that's completely lost in the shuffle.
I want to advise people that when you have two high powered people like Dan Loeb, a very respectable, good manager and Bill Ackman going at each other, you can't get involved. The mechanics of the market don't let you. There's going to be short squeezes. There's going to be guys saying negative things. You're going to get blindsided.
What's the worth of the company? My friend Herb Greenberg has a very good documentary, right now, on CNBC.com and he and I talk multiple times a day and I think his thesis that perhaps this could be like the for-profit education companies where they get scrutiny, and they get scrutiny, and scrutiny, and then finally, people stop signing up to be potential distributors and maybe the customer starts thinking, wow, I don't know.
One of the things that disturb me is that Michael Johnson said that he paid Barry Minkow, who's a short seller who's now in prison, $300 thousand dollars to go away because it was a nuisance.
You know, my personal insight in this is this. I mean, I've certainly been in the arena or many, many years in my life and when someone says that your honor and your integrity is on the line, then you got to be like Stuart Miller at Lennar, my friend Jeff Sonnenfeld reminded me of this today. He's a lifetime friend, Yale professor, and fabulous guy. You must fight every day. You must never give in. You must never pay.
Only Lennar's fight led to Minkow being in prison, so my personal experience says, I don't like the fact that another guy who took a shot at Herbalife got paid.
But I think people in general should not be involved in a situation that's too difficult.
Okay. Now, they're having and investor meeting today.
Is there anything that they can say to get the short sellers out of there?
Well, they keep referring to a very respected, their words, very well thought of consultant called Lieberman, which said that most of the product does only end up at the end customer. There's always the question of how much of it is the distributor? How much of it is them, the distributor, trying to get another distributor, this is the so-called Ponzi Pyramid Scheme. The pyramid scheme that Ackman mentions and we really need the government to determine what is and what isn't.
So I mean, your end game here is not necessarily that people stop using the product because that's a big global product. The end game is not that people stop selling the product. The end game is very simple. The end game involves, will the government get heavily involved. If that's the case, then, Ackman's going to be right.
All right. Well, as an investor, stay out of the stock.
Yes. Exactly right.