Ackman questions Herbalife recruiting tactics on new website

Mon Feb 3, 2014 2:11pm EST
 
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By Svea Herbst-Bayliss

BOSTON (Reuters) - Billionaire investor William Ackman on Monday charged that Herbalife (HLF.N: Quote), a seller of nutrition and weight-loss products, found new distributors through a business that had been convicted in Canada of running an illegal pyramid scheme.

Ackman, who runs hedge fund Pershing Square Capital Management, has been betting against Herbalife shares for more than a year, claiming that the company itself is a pyramid scheme.

On a new website, Ackman profiled Shawn Dahl, a former Herbalife distributor, and Dahl's lead-generation business, Online Business System, charging that Dahl lured people to become Herbalife distributors with false promises of making money fast. (www.herbalifepyramidscheme.com)

"While Herbalife has attempted to distance itself from Dahl recently, the company cannot escape liability for participating in Dahl's deceptive and destructive conduct for a decade," analysts at Ackman's $12 billion hedge fund wrote in the summary of their report on Dahl.

Ackman's charges raise fresh questions about Herbalife's recruiting tactics. They came hours after the company gave preliminary results for its 2013 fourth-quarter profit and sales that topped Wall Street views and said it authorized a $1.5 billion buyback of shares, more than initially expected.

Herbalife's shares rose 4 percent early in the day, but fell nearly 3 percent to $62.56 after Ackman's report came out.

Ackman has made a $1 billion short bet against Herbalife, predicting the company's share price, which has risen 80 percent in the last 12 months, will eventually fall to zero.

Herbalife has vehemently denied Ackman's allegations that its business is a pyramid scheme. Its share price surged 138 percent in 2013. So far this year, the share price has fallen 20 percent.   Continued...

 
William Ackman, CEO of Pershing Square Capital Management, speaks at the Partner Connect 2013 conference, sponsored by Thomson Reuters, in Boston April 5, 2013. REUTERS/Brian Snyder