Can someone explain to me the major difference in MLM structure between HLF and Amway, Mary Kay, Melaleuca, Avon. Why would HLF get shut down if they have a similar model to others or is Ackman's bet that all MLM Companies are Pyramid scams?
The real answer is that they have entirely the same business model. HLF patterned its sales strategy after learning of Amway's runaway success. It allows for low overhead costs and high distribution rates. A thing of beauty!
Actually there is very little difference if any. HLF is an outstanding company with a good product line and it is well managed and gives the consumers and sales distribution a nice opportunity to earn a few bucks. And what is wrong with that ?
Nathan has it right. To add to his line of reasoning...
Einhorn fired the initial shot on a a conference call. He asked a leading question and shares were being sold rapidly. I think Ackmann saw this as a soft target and just needed to concoct a viable reason. So he announced he was short and the stock tumbled again. Then he put together a slide show to create an illusion there was substance when there was not.
Ackman doesn't need to be right --- just believable, to stay out of trouble with the SEC. This is plain manipulation under the guise of an investment theory.
Maybe Aaackan is arrogant enough to believe that he could drive HLF out of business?
Maybe Aaackman may have just intended to keep sliming HLF the way Einhorn did to GMCR.
Maybe he always intended to get out of his position once it was apparant that he had forced the share price down as low as it would go, as Einhorn did with GMCR?
Icahn probably decided that he was going to teach the little school-yard crybaby a lesson in regards to his HLF short bet after their war of words on CNBC on Jan. 25th. * Aaack ! *
Well Ackmann was arrogant enough to think that Ron Johnson would be the saving grace of JCP... However, Ackmann is still in the black on paper so I can't say its a bad trade... yes. The interesting part will be how he will unwind the trade once it becomes apparent that his to $0 hypothesis is incorrect. If Ackmann's only exit strategy was his $0 hypothesis then I feel sorry for his investors. While I think HLF is definitely worth more than $40, I am impressed with the shorts ability to spread FUD and hold the price down for so long.