“This morning we learned that Dan Loeb is long nutritional supplement company Herbalife, and now we know why.
Loeb hashed out his thesis in his latest letter to investors — his hedge fund, Third Point is up 21.2 percent for 2012, and 9.2 percent for Q4, by the way — and said that fellow hedge fund manager Bill Ackman’s short against the company is “preposterous.”
After going over Herbalife’s awesome stats ($29.87 billion in sales with 20-50 percent growth each year since 2004). Loeb gets to the heart of why the company is not a pyramid scheme, as Ackman has said.
From the letter:
The pyramid scheme is a serious accusation that we have studied with our advisors. We don’t believe it has merit. The short thesis rests on the notion that the FTC has been asleep at the switch, missed a massive fraud for three decades and will shortly awaken (at the behest of a hedge fund short seller) to shut down the company. We find this to be preposterous.
He goes on to say that the FTC’s regulatory framework makes it possible for multi-level marketing companies to conduct business legally. Not only that, but he adds that while Ackman’s presentation was “lengthy” there was “little new ‘news’ in the presentation” or evidence to show that Herbalife had crossed into breaking the law….”
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