I am new to this board and to HLF. Started buying yesterday and currently plan to keep buying, unless there is some new news. As a retired CEO of a public company, I am at a loss (other than Einhorn's reputation for shorting) as to why HLF is in this situation. The quarter was excellent. The guidance was okay (certainly not a cause for a major pullback). The questions posed by Einhorn seem benign. The SEC looked at this Company 5 years ago and they found nothing. And, I can tell you, if the SEC has been in your shorts you are very aware of what they require and very attentive to making certain you never do anything to give them cause to come back (unless your name is Aubrey McClendon, of course). So, in my opinion, unless another shoe drops (which is what everyone is worried about), this is a stock that deserves to be back in the mid-$60's and if that starts becoming apparent in the coming weeks, for all these shorts to cover, it will probably drive the stock well past that level. But, I guess if everyone thinks Einhorn may have something to say at a conference in mid-May, there may not be any sense of comfort whatsoever until then.
The SEC looked at Bernie Madoff for 30 years and did nothing when it turned out his company did not do a single trade.
The SEC was embedded with it's staff at Lehman Brothers 6 months before the collapsed and didn't know Lehman executives was swapping $50 billion out each quarter to hide their debt.
The SEC is a bunch of lawyer idiots who awaiting to get out of their $150,000 government salaries to work for companies like this as general counsel so they can earn $2 million a year cheating people.
Your comparison to Bernie Madoff is moronic: Madoff's operation was like a vacuum cleaner when it came to cash. Herbalife is like a garden hose: paying dividends. They could not possibly have the number of distributors that they have if they were not delivering products that offer value for the money.
Excellent post. I am not sure what Einhorn could possibly say in mid-May that people would not have found already. With billions of dollars having already transferred hands, it is astonishing that to this very day - there haven't been any sellers who can provide a detailed articulation as to what the problem is. Particularly when they have a great economic incentive to do so. And the negative reports from the media have been non-substantitive.
I know for myself, I have literally analyzed thousands of companies over the years - and have held shares of Herbalife for years. Einhorn's questions did not specify any issues, perhaps he was trying to learn more about Herbalife's business. The issue of distributors purchasing product versus end-consumers I believe is immaterial, since often they are the same. I think the key metric is the return rates, which are a tiny fraction of a percent. Plus, I've used Herbalife products myself...I would not have purchased the stock years ago if I didn't like what they sell.
And again, the company's ability to pay ever-increasing dividends plus regularly reduce the share counts through buybacks I think refutes theories of shoddy accounting. It takes hard cash to do these things - and cash cannot be fabricated (unless of course, you are the Fed :-P
Perhaps I am missing something? I am really curious what Einhorn has to say. Either he is a super god who has able to find something obvious that no one else is capable of finding - or this situation is a complete farce.
"Under the terms of the repurchase agreement, Herbalife will pay $427.9 million on May 4, 2012 from the Company’s cash on hand and from borrowings under the Company’s senior secured revolving credit facility and will receive a portion of the shares on a pre-determined date and the remainder upon completion of the program."
According to their press release, they are not just using hard cash to finance this buy back of shares but also utilizing the company's "senior secured credit facility."
What exactly is that?
I completely agree with you and I can't seem to understand this selloff either. However, from a purely technical perspective, the volume and pattern of the past 3 days tells me something is very very wrong and the information just hasn't made it to the public yet. Institutions are dumping right now, and a lot of scared money wants to get out first, ask questions later.
I've seen this kind of 3 day high volume move before - in 2010 after the deepwater horizon incident, and when DMND was being investigated. This, however, I do not understand the least bit.
I have november 45/50/55 call spread. Will not add more if it goes down further - against my rules.