Yesterday, Herbalife put out a statement claiming that Bill Ackman and his team cancelled a meeting with them last month at the last minute.
“Ackman is entirely predictable, with Herbalife put options expiring next week, he is off on another tirade of misrepresentations the sole purpose of which is to drive down our share price. The facts about our business are inconvenient for Mr. Ackman, and he clearly has no interest in learning them as evidenced by his team’s last-minute cancellation of a meeting last month that he requested,” Herbalife said in a statement posted on Twitter.
Ackman, the CEO of $US18 billion Pershing Square Capital, said that’s not true, in a new statement released on Thursday.
“Rather than speaking to its deteriorating business fundamentals, Herbalife appears to be attempting to distract investors from the facts by claiming — falsely — that we cancelled a meeting,” Ackman said.
According to Pershing Square, the initial meeting between their legal counsel David Klafter and Herbalife was scheduled for Dec. 17.
Pershing Capital says that they “postponed” the meeting. They didn’t “cancel” it.
“I’m sorry about having to postpone our meeting. We’re not passing up the chance to meet you,” Klafter wrote in an email to Herbalife.
Dec. 17 was the day that Ackman appeared on Bloomberg Television and released an internal video of one of Herbalife’s top recruiters that made them look pretty bad.
Ackman has been very publicly crusading against Herbalife for two years. He first revealed his short in December 2012 by giving a massive 342-slide presentation. He’s betting the company’s stock goes to $US0.
Ackman’s thesis is that the company operates as a “pyramid scheme” that targets poor people, particularly from the Hispanic population. He believes regulators, specifically the Federal Trade Commission, will shut the company down. (The FTC opened an investigation in March 2014).
After Ackman made his short public, numerous hedge fund managers, most notably Carl Icahn, piled on by going long the stock. In the months following Ackman’s initial presentation, share of Herbalife surged and Ackman amassed millions in paper losses.
Ackman is now back in the money on his position as the stock has declined in recent months.
Shares of Herbalife were last trading around $US31.72.
Here’s the Pershing Square release:
New York, NY (January 8, 2015) — Responding to Herbalife’s statement issued after the close on Tuesday, January 7, 2015, Bill Ackman stated: “Rather than speaking to its deteriorating business fundamentals, Herbalife appears to be attempting to distract investors from the facts by claiming — falsely — that we cancelled a meeting.”
To set the record straight, Pershing Square Capital Management is releasing all correspondence between Pamela Jones Harbour, Herbalife’s Chief of Global Member Compliance and Policy, and David Klafter, Senior Counsel at Pershing Square. On November 6th, Mr. Klafter sent a 19-page letter to Ms. Harbour outlining serious compliance issues at Herbalife and proposing an in-person meeting to discuss these issues. Ms. Harbour responded by letter inviting Mr. Klafter to Herbalife’s LA headquarters.
Mr. Klafter and Ms. Harbour had subsequent conversations and email correspondence that resulted in a meeting being scheduled among Ms. Harbour, Mr. Klafter and others at Herbalife’s headquarters on December 17th. On December 10th, Mr. Klafter emailed Ms. Harbour to explain that he would have to postpone the meeting because of other pressing year-end priorities (which included the release of a recently obtained Herbalife video). Mr. Klafter wrote: “I’m sorry about having to postpone our meeting. We’re not passing up the chance to meet you.” Mr. Klafter remains interested in meeting with Ms. Harbour as soon as possible.
On December 17th, the originally scheduled date of the meeting with Ms. Harbour, Pershing Square released a video of a meeting of senior distributors and corporate Herbalife executives including: current Senior Vice Presidents Rob Levy and Bruce Peters, Vice President Mike McKee, and Leslie Stanford, a Chairman’s Club member and former member of Herbalife’s board of directors. At the meeting, Chairman’s Club member Stephan Gratziani explains the fraud and deception in Herbalife’s business model. We encourage interested parties to watch the eight-minute summary video and the three-hour complete recording.
Herbalife’s stock price declined 12% on Monday and 8% yesterday on no news. Herbalife did not comment as to the reasons behind the stock price decline. Today, after Mr. Ackman appeared in a CNBC segment, Herbalife’s stock price rose 4%. In its statement today, Herbalife stated: “[W]ith [Mr. Ackman’s] Herbalife put options expiring next week, he is off on yet another tirade of misrepresentations, the sole purpose of which is drive down our share price.”
Mr. Ackman stated: “Yesterday, on CNBC, I said that Herbalife will miss earnings for the fourth quarter of 2014 and will lower its earnings guidance for 2015. If these assertions are incorrect, as Herbalife states, then the company should correct the record by reaffirming both Q4 and 2015 earnings guidance.”
To set the record straight, 97% of the Herbalife put options owned by Pershing Square have been extended and have expiration dates up until 2016. The January put options held by Pershing Square have a strike price of $US65 share. Pershing Square may choose to extend, sell or exercise the January put options depending upon market conditions and other factors.
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