This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Ackman Rails Against Herbalife, But Shares Barely Make a Blip

NEW YORK ( TheStreet) -- Hedge fund manager Bill Ackman's presentation on Herbalife (HLF) was seemingly a little less convincing than he'd hoped, at least judging by Wall Street's reaction.

Ackman, founder of Pershing Square Capital Management, made the presentation in a conference call Tuesday after a New York Times article on Sunday questioned his 2012 short call on the nutritional supplements company.

In response to the article, Pershing Square held a 2 p.m. EST conference call to relay its research into Herbalife's China operations.

But Herbalife shares had only slipped 1.2% to $65.39 by market close Tuesday, a blip compared to the 18.2% loss suffered over January as scrutiny over Herbalife's operations heated up.

During the presentation, Pershing Square railed that Herbalife had violated China's direct-selling and pyramid-sales restrictions, citing research from OTG Research, a firm it hired to investigate the claims.

According to OTG's findings, Herbalife breached the law by "paying multi-level royalties based on unlimited downline levels" and "incentivizing distributors to recruit a potentially infinite downline in order for distributors to reap sales-based 'consulting fees'."

In a Q&A following the presentation, Ackman noted, "There's no circumstance under which we are wrong on whether or not Herbalife is a pyramid scheme. There's investment risk with respect to Herbalife. There's no certainty the government will investigate the company."

"I believe if the FTC, or the SEC or state attorneys general investigated Herbalife and looked into the issues we've identified there's a certainty the company would be found in violation of U.S. law, Chinese law, other law and the government would work to shut the company down," Ackman continued.

Herbalife responded to Ackman's presentation in a statement released on Tuesday. "Herbalife remains confident in its business in China, which is built on customers enjoying and benefiting from our nutrition products each and every day," it said. "We will continue to invest in this important market and collaborate with the Chinese government to deliver high-quality nutrition to the Chinese consumer through lawful direct selling practices. The presentation reflects Mr. Ackman's continued failure to fundamentally understand Herbalife's business model."

The New York Times reported on Sunday that Ackman had lobbied for the company's demise, attempting to incite an investigation into the legitimacy of Herbalife's operations in China in order to profit from a $1 billion bet shorting the stock.

"To pressure state and federal regulators to investigate Herbalife ... his team has helped organize protests, news conferences and letter-writing campaigns in California, Nevada, Connecticut, New York and Illinois," wrote journalists Michael S. Schmidt, Eric Lipton and Alexandra Stevenson in the paper.

Must Read: Warren Buffett's 10 Favorite Stocks

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs