Yesterday afternoon, controversial nutritional supplement company Herbalife (HLF) announced it’s facing an official inquiry by the Federal Trade Commission. The FTC’s move marked a significant triumph for billionaire investor Bill Ackman who has a much-hyped bet against Herbalife shares.
Since announcing his position in December of 2012 Ackman has been waging a one man war against Herbalife. According to the New York Times, funds from Ackman were used to pay the travel expenses for advocacy groups who went to Washington DC to meet with FTC head Edith Ramirez shortly before the commission announced its investigation.
The issue isn’t whether Herbalife is a pyramid scheme or a legit MLM. The courts will give us an official ruling on that front soon enough. The real question is how a billionaire investor was able to use his deep pockets to trigger an investigation of Herbalife.
The advocacy groups may feel like victims but its Ackman who stands to reverse billions of dollars in losses if Herbalife gets shut down.
In the attached video Hedgeye’s Keith McCullough draws a distinction between grassroots activism and what he calls “Ackmanism.” What’s disappointing to McCullough is that Ackman has been able to “redefine losing” through perverse abuses of government power.
Ackman says Herbalife’s business model is “Robin Hood in reverse," meaning it steals from the poor and gives to the rich. Sadly the practice of rich people using their influence to direct governmental enforcement efforts is called business as usual.
As for whether or not the public sees fit to punish politicos bailing out billionaire investors trapped in losing trades, McCullough isn’t optimistic. “I don’t know who’s going to stand up against this and call it what it is. You need practitioners of activism to shine a light on this and remind the government what they should pay attention to.”
- Bill Ackman
- Federal Trade Commission