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Ackman goes after Herbalife’s nutrition clubs

By From page B8 | July 23, 2014

NEW YORK — Activist investor Bill Ackman once again denounced weight loss and nutritional supplements company Herbalife as a pyramid scheme, but Wall Street shrugged off his criticism and sent the company’s stock soaring 25 percent Tuesday.

In a three-hour presentation in New York, Ackman’s focused on Herbalife’s “nutrition clubs,” private settings where Herbalife distributors sell the company’s products — such as weight-loss shakes — and recruit new members.

Ackman laid out a case that because the clubs run by Herbalife’s distributors focus on recruiting instead of selling products, the clubs are by definition a pyramid scheme.

Ackman, who runs Pershing Square Capital Management, an activist hedge fund, has bet heavily against Herbalife by using “short” trades that will be profitable if the price of the company’s stock falls. Ackman has been trying to convince other investors to take similar positions, most memorably in a shouting match he got into with Carl Icahn, a rival investor, on live television in January 2013. Icahn has taken the opposite position and has defended Herbalife.

Herbalife has vigorously denied Ackman’s arguments, and says it operates like a multi-level marketing company similar to Avon, Amway and Mary Kay.

 

The Associated Press

The Associated Press

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  • JimboJuly 22, 2014 - 7:08 pm

    AMWAY IS A PYRAMID SCHEME. They spend 99% of all time telling members to recruit others.

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