“(Reuters) – Activist investor Bill Ackman ramped up his campaign against Herbalife Ltd on Thursday with a three-hour presentationin which he called the weight management products company an unsustainable “pyramid scheme.”
The company responded by saying Ackman’s presentation was riddled with numerous “misstatements and mistakes” and complained its executives were denied access to the event.
Investors surveying the battle, now in its second day, sent Herbalife shares down 10 percent to $33.50 in afternoon trading, adding to Wednesday’s 12 percent fall.
Thursday’s presentation by Ackman came a day after he confirmed that his $11 billion Pershing Square Capital Management is betting against the company. Best known for agitating for management change at companies his fund invests in, Herbalife is emerging as one of Ackman’s biggest short positions in years.
The hedge fund manager outlined his case for shorting shares of Herbalife in a lengthy presentation entitled “How to be a millionaire,” that featured more than 300 slides questioning how the company generates it sales and the pricing models for its products.
Speaking before a crowd of more than 500 at an event sponsored by a charitable group, Ackman said he is so sure of his position that he believes the company’s stock price will eventually go to zero. The manager promised to continue the assault by putting up a website to continue his critique that Herbalife has grown remarkably rapidly without demonstrating “much substance” to justify its growth.
“We have an enormous short position and we believe we are right,” Ackman said.
Herbalife responded by saying there were many misstatements and mistakes in Ackman’s presentation. “Had our executives been there, they would have been able to tear Mr. Ackman’s premises and interpretation of our business model apart,” Herbalife’s statement said.
For his part, Ackman criticized the company for allegedly inflating the suggested retail price of its products and overstating its retail sales in public filings. Ackman also accused the company of targeting the poor and ill-informed to become distributors of its products.
“A pyramid scheme is actually a modern day version of a Ponzi scheme,” Ackman said.
On Wednesday, Herbalife Chief Executive Michael Johnson said Ackman’s charge about being a pyramid scheme was “bogus,” and he criticized Ackman for using a public attack on his company to benefit his “business model…..”
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