Yesterday, hedge fund manager Bill Ackman gave “the most important presentation” of his career and it was bizarre.
Ackman said that his team spent nearly $US50 million on an investigation into the company’s so-called “nutrition clubs.”
As Ackman spoke for nearly three hours, shares of Herbalife soared to close the day up 25%. The market clearly didn’t buy his argument.
Perhaps he had a bigger plan, though.
For more than 18 months, Ackman has been on a crusade against Herbalife — a maker of nutritional shakes he believes is operating as a “pyramid scheme” that targets poor people. He’s betting that Herbalife’s stock will go to zero.
During his presentation, Ackman had some harsh words for the company. He went as a far to compare the Herbalife to Nazis.
“The big lie is used by totalitarian regimes, and by the Nazis and by lots of people and people generally believe big lies because they are so bold that how can they possibly be false?” Ackman said.
He also lashed out at the company’s CEO, Michael Johnson.
“I’m a huge beneficiary of this country, OK. Michael Johnson is a predator, OK. This is a criminal enterprise, OK. I hope you’re listening Michael. It’s time to shut the company down,” Ackman said as he was beginning to choke up after talking about the “American dream.”
During the Q&A portion of the event, Dealbook reporter Matthew Goldstein asked Ackman if he was trying to goad the company into suing him with his inflammatory language.
“It would be great,” Ackman said. “Bring it on.”
It’s not immediately clear if this is Ackman’s plan, but it would make sense.
If the company were to sue, they would likely say that Ackman is spreading false and misleading information.
In order to have a claim, they would have to prove Ackman to be wrong. Truth is a defence and Ackman would need access to any documents that can help prove the case. This would lead to discovery and that would give Ackman and his team access to documents that could support his short case.
“He would get very broad discovery. If Herbalife sues him he could open up discovery and demand every email among Herbalife executives. And they had to be discussing him and his charges over the last two years and he’d find out where they were defensive, where they were sensitive, what their counter arguments were going to be. There’s no better way to find out where they’re nervous and what they say to each other in the light of his charges,” Columbia Law Professor John Coffee told Fox Business.
Herbalife’s CEO said they may sue.
“We may. That’s on the table. It’s an option. I think our case gets stronger every day,” Herbalife CFO John DeSimone told Bloomberg TV yesterday.
Then again, maybe they won’t.