Are These David Einhorn’s Newest Targets?



Comments (5)

  1. andrew pender says:

    As an investor since oct 2006 I have nothing but admiration for the directors. Their development of their products and what Herbalife stands for and provides worldwide in my opinion is second to none. Which company have clients preferred over the years? Royal Bank of Scotland Plc or Herbalife?
    With the adoption of and continued growth of the daily consumption model more and more retail sales are what they are retail sales to the independent distributors. Does this mean Starbucks is dodgy?
    MLM is a method of selling. I personally believe Herbalife as company do not over sell any possible business opportunity that may develop. All individuals need to say is no to any independent distributors pressure.

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  2. Distributor Dan says:

    Oh dear.. Where to even start with this article!

    Firstly, where’s your disclosure? Are you shorting Herbalife?

    Now to your other comments, “Where Truth starts…”

    1) Err.. pyramid schemes are illegal and very different from the Network Marketing structure in Herbalife.

    2) Re: “90% of Distributors didn’t turn in a profit” are you including the huge number of customers that register as Distributors to benefit from the generous discount?

    3) Re: “These figures are in line with exposés in Newsweek, USA Today and Britain’s The Times on other popular pyramid schemes.”

    So there were exposés on illegal trading schemes in these media outlets? Why didn’t they just call the police? So let’s say it’s your definition of a “Pyramid Scheme” – they were on “other popular schemes”, not even about Herbalife, but you’re making a mental leap for your own purposes here…

    4) Re: “The only ones that make money are those at the top. Like Herbalife’s CEO, Michael O. Johnson. He was the highest paid CEO last year, earning $89 million, according to Barron’s.”

    So now you’re inferring that Michael O. Johnson is a Distributor? At “the top”? Err.. He’s not a Distributor and no Herbalife employee is allowed to be. He’s the CEO and Chairman of the board and no doubt his remuneration is tied to the company’s stock price, which has been going through the roof for some years now with good reason.

    And no, you don’t have to be “in at the beginning” to make money with Herbalife – there are plenty of us who make great money who started decades after the company started…

    5) Churn.. Every company has a churn rate and in Herbalife anybody can join – no checks, no interviews, no high initial investment, nothing. Just fill in the form. So, it’s cheap and easy to join and cheap and easy to leave if distracted by life…

    6) “It’s not sustainable. As time goes by, finding new customers becomes harder and more costly. And Herbalife and Nu Skin are already facing this reality…”.

    This one is almost funny! So Herbalife are “facing this reality” in the form of booming worldwide sales, growing by over US$ 1 billion last year?

    7) Re: “Both companies have apparently exhausted the pool of fools in the United States, so to speak. Now they’re relying on uninformed citizens in international markets.”

    So from your position of “Truth” and “the data confirming it”, you could show the US Sales figures in your article couldn’t you? Err, trouble is they contradict your statement – 23% US Growth Q1 2012…

    8) Re: “And for Herbalife, roughly 80% of its revenue came from outside North America.” Err.. North America is a big place, sure, but Herbalife is open in another 80 countries, including some pretty big ones, like India… Hardly surprising that Herbalife makes a lot of money outside of the US…?

    9) Re: “Bottom line: It’s only a matter of time before the rest of the world wises up to the true nature of these businesses and, in turn, the stock prices plummet. ”

    “A matter of time”..? Like 32 years isn’t enough? Hmm..!

    Timothy Ramey of D.A. Davidson & Co. has called the the drop in the shares a “major buying opportunity” and reaffirmed his “buy” recommendation on HLF. He thinks the stock could hit $150.00 in the next five years.
    (www.benzinga.com).

    It is indeed time the world wises up to the true nature of these businesses… and whilst some people are doing that, I’m working hard on my business, helping people get results with great products and in the mean time, I’ll buy myself some HLF shares…

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  3. David H says:

    Louis – What are your connections to David Einhorn? Did his people feed you ideas for this article? The statement “Both companies have apparently exhausted the pool of fools in the United States, so to speak. ” is absurd and you know it. Many, many U.S. companies are seeing fast growth in other countries. I can’t speak for NuSoft, but HLF works well in developing nations. Do you think that wholesalers who sell to retailers are “pyramid schemes”? That is essentially what occurs. The important thing to look at is whether the product is being consumed. HLF has been in business for 32 years and sold $3.6 Billion TTM – those stats alone discredit your arguments. I wish the SEC would investigate Einhorn, Greenberg, Alpert and you to see if you guys are conspiring to drive down stock prices. I notice you didn’t mention that Einhorn was fined over $5 million in February by the FSA for market abuse.

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  4. Louis Basenese Louis Basenese says:

    LOL.

    I have no connections to David Einhorn. I have no short positions in either stock. And I don’t own any put options, either.

    Although Einhorn didn’t reveal a short position in HLF or NUS, it could be because he hasn’t established one (yet).

    If he never sells either stock short, I still believe the fundamentals warrant avoiding them.

    If you’ve taken offense to my use of the word “pyramid scheme,” fair enough. There’s no point to quibble over semantics. So I’ll call them what they call themselves – multilevel marketing firms or networking marketing firms.

    As William Keep, Dean of the School of Business at The College of New Jersey, who has published research on MLM firms, says, “[MLM’s} use vocabulary to describe business activities unlike that used among other businesses. This, of course, results in reduced transparency.”

    Read the latest HLF of NUS 10-ks and you’ll see that’s certainly true. And in my book, less transparency means you’re trying to hide something.

    Does Groupon ring a bell? Enron and SPACs? The list goes on…

    And our debate could go on, too.

    The good news is that the market will prove to be the Great Mediator. One of us will be proven right and one of us will be proven wrong.

    So let’s check back on these stocks in six months. If I need to eat crow, I’ll gladly do it. Will you?

    Until then…

    Lou Basenese

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    Joe Reply:

    Nearly 3 years Louis….looking like you’re wrong chap.

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