When Bill Ackman went on CNBC and claimed that he would ‘expose incredible fraud’ at Herbalife (NYSE:HLF) in a talk he was giving the next day, the company’s share price dropped dramatically.
Why wouldn’t it? Here was the billionaire CEO of a top hedge fund essentially staking his entire reputation on the claim that an international company, supposedly generating hundreds of millions of dollars a year, is fraudulent.
I tuned in on Tuesday at 15:00 BST (10:00 Eastern Standard), waiting for that ‘Eureka’ moment, the big reveal, when the full extent of Herbalife’s insidious perfidy would become clear, unveiled by Mr Ackman for all the world to see. Ninety minutes later, I was still waiting.
You know what didn’t wait, though? The markets. It was almost satirical to watch how Herbalife stock soared as Mr Ackman spoke. Where were the earth-shattering revelations? As Diane Brady wrote for Businessweek;
‘The audience had rearranged their schedules to get a glimpse of some new evil in their midst, only to get a lecture about how Herbalife’s nutrition clubs sucker people into buying shakes for themselves... The comment feed alone was a litany of virtual yawns and shrugs, which may be why it was disabled.’
If this had been a presentation by a small, well-meaning band of do-gooders operating out of a one-room apartment somewhere, maybe people would have taken slightly more notice of the results. Again, however, Mr Ackman was hoisted by his own petard. $50 million had gone into this investigation, he told us, and we all thought the same thing – if this is all you could come up with after $50 million, you should have saved yourself the trouble.
Mr Ackman did not make things any better for himself by littering his attempted exposé with hyperbolic statements. As William Alden and Matthew Goldstein wrote for the NY Times, the Pershing Square Capital Management CEO ‘compared Herbalife’s sales practices and tactics to those of Enron, the mafia, drug dealers and even Nazis.’
Furthermore, the presentation itself was shoddy. If you’re going to try and bring down a company via Powerpoint, your speech needs to be precise, practical and flawless; interrupting your speech to ask something along the lines of Do we have the second Albright video? No? Look it up on YouTube, it’s on there, should probably be avoided. Instead of the promised ‘deathblow’ we got Ackman’s Amateur Hour.
Mr Ackman really, really wants people to believe that Herbalife is one big scam. In a voice choked with emotion, the hedge-fund billionaire took us through his own family history, though how this related to the facts at hand was not entirely clear. Apparently because Mr Ackman’s ancestors came to America as poor immigrants he is in a unique position to sympathise with those in poverty whom Herbalife, he alleges, are taking for a ride.
Time will tell if Mr Ackman’s allegations against Herbalife have any basis in fact; Reuters reported back in April that the FBI was conducting its own investigation into Herbalife.
However, from the reaction to his presentation, Mr Ackman must realise that his vaunted ‘deathblow’ turned out to be little more than a love tap. He promised that ‘we won’t disappoint’; he seems to have done just that.