the basic business is RECRUITING new distributors and having these distributors ORDER PRODUCT. That is the money maker and they need to recruit several million each year to MAINTAIN revenues and more to grow revenues. Regardless of what happens on legal or regulatory front the TASK of continuous recruiting is going to eventually wear thin and the then the PYRAMID breaks.
Interesting to note that amway has about three times the annual revenue of HLF and yet they only have about 20% more "distributors" A big growth area for Amway has been china (as well as HLF) so apparently both companies are getting around the so called non pyramid marketing structure where they are not allowed to pay distributors for results from down line distributors. With all the corruption in China I am sure they are circumventing the laws somehow to attain their growth. So, who knows, maybe the billionaires club will take HLF private (as Amway currently is) and reap tremendous profits for years to come from gullible new distributors destined to lose money. I guess there are new suckers born every minute and these MLM companies certainly have developed a system to access them. And as long as regulators and courts continue to give them the blind eye it might continue forever. Absolutely scummy distribution system however it is legal in most jurisdictions, unfortunately. Anyone getting to the top of the pyramid has certainly costs untold losses to many thousands recruited and failed as that is the ONLY way to success. Currently NO position.
as a sidebar I did a little research on Amways nutrilite products I think they are called. anyway, their meal replacement shake (which they readily show the retail price of as compared to HLF trying to hide it for some reason) sells for about $3.5 a meal vs the formula 1 which I think is around $1.4 per shake. I did not bother to compare sizes, calories, protein etc but bottom line is Amway is certainly NOT cheap but apparently they are selling a lot of something as revenues are nearly 12 billion, or something like that. So, those boys in Michigan are apparently NOT hurting with their private company AMWAY. One last note. Are regulators really going to shut down these multi billion dollar companies? they should imo but political expediency being what it is I have grown very doubtful. They will do what they always do and take the path of least resistance with some possible minor fines from time to time.
As a potential short I can not take too much solace in the late audit from PWC. HLF operates a pyramid marketing scheme (legally for now) in over 80 countries and with currency situations like Venezuela it might take a long time to untangle all the nuances. Plus ackman has given them a lot of other areas to make sure they cover thoroughly. I will probably not take any more short positions on this company in the forseable future, and will be happy with returns made on the tranches I did execute profitably. but I think the easy money has been made on the long side also and it is going to be much tougher to make decent returns on this equity, barring a takeover. I still think the risk/reward is favoring the risk side after the huge run up in share price, but with lack of regulatory intervention it is going to be a see saw type situation. there are probably better sandboxes for both shorts and longs at this juncture.
Yes I think PWC takes Ackman very seriously. And I also think that Johnson and Co. take Ackman very seriously. He is a formidable opponent and when you are running what basically amounts to a LEGAL pyramid scheme you are probably always worried about someone finding the smoking gun or something that regulators will all of a sudden make it an ILLEGAL pyramid scheme. Ackman is a monomaniac on a mission. Dismiss him at your peril.
It is not the product (marginal commodity imo) or the price (high imo) that are my concerns. I have done all the due diligence on that necessary. However, I think Ackman did a disservice bringing up those points because it takes focus off the main issue. It is the PYRAMID and the total inability to make any money by being a retail salesperson, which means the only way to make money is by recruiting OTHERS who also cant make any money selling at retail.. this is the fraud and this is what regulators should stop.
Nice anecdote. Of course, you have no PROOF or BASIS to give credit to HLF products for these changes. But giving credit to OTHER changes in your life style are NOT PROFITABLE are they? No, so you sing the praises of HLF and use these stories to RECRUIT others into the scheme. I know, I know.........HLF products are just a TOOL. ONe of many you use. LOL Stories SELL. FACTS TELL. So use stories whenever possible because most of your potential recruits are so desperate, needy and ignorant they don't want the facts. Just tell a nice story and make everyone FEEL good for a while. Oh yea, and OPEN UP their WALLET and give HLF a nice check that most can not afford. Credit cards are fine also. dont worry if you have reached the limit, you will be able to pay it back with all the retail profits you will make selling this stuff to people desperate to achieve their financial and health goals also. Dont worry anyone can buy the exact same product under the new distributors fully loaded wholesale cost at many other places.
he is after all, the 800 pound billionaire on the long side of this fight. First, I don't think he wants to be any part of a buyout. It creates liquidity problems and the primary way then for him to extract equity is to go back to public markets eventually or find another private equity deal which is too messy. the buyout would be at least 9 billion or so and I dont think the EBITDA margins would be that compelling to him with the given risk factors discussed here ad naseum. so, I think he will sell as soon as practical. Probably would like to wait until he qualifies for long term capital gains and maybe he will try to pull an inside deal if and when HLF makes major share buyback after release of audit, and he will sell most of his position to them in one chunk sign more stand downs, resign his people from board. They will spin it as win win yada yada yada it was a great opportunity for hlf to make major purchase of stock buyback in one stroke without disrupting price, good for all , you know the line. then HLF is left with a lot more debt, fewer shares and the big boy moves on proving once and again to billy bob that he is da man.
"direct selling companies" that is a good one. Thanks for the laugh. DSA should change their name to DRA, or "Direct Recruiting Assn" Or maybe just "Pyramids R US". LOL
buy the kit, start taking product daily, start eating healthy, and exercise I will look better and lose weight. then I can tell my story to people I meet about how I did it. I could say i started to eat right. I could say I started to exercise. I could say I started to take HLF products. Which of these stories is likely to make me money and help me recruit new people which will earn me checks from HLF when they sign up and order product? hmmm, lets see now. What story will I tell? What will I give credit to for my "improvement"?
Yea, but all of Gordito's down line make money. So somehow he is bucking the trend of 99% losing money. It is amazing when someone can recruit people that ONLY make good money, and even make great money selling at retail, when the rest of HLF distributors FAIL miserably.
I am so happy i exited the shares a long time ago. They are unbelievable inept. But I see they still employ a media relations specialist to make the BIG corporate announcements like the suspension of the preferred dividend. Too many people doing too little work for too much money. And all of them doing what little work they do VERY BADLY. LOL those still long this pig should be outraged and demand a complete makeover to preserve what little, if any, value that is left. I only wish I had shorted this thing.
the results are awful. The expenses keep going up while revenues drop. They hire MORE people while revenues go down. It should not be that hard to run fewer than 80 motels when the day to day operations are all farmed out to management companies. One or two people in Nebraska should be able to do everything administratively that is required. Anyone long this pig should have their head examined until a complete revamping of management takes place. If the bulk of G&A is for strategic realignment lets just say it has been an utter failure and move on with a low cost operation that tries to return some money to shareholders. Board should all be changed also as their oversight has been abysmal.
matt stewart, QTR, and especially Billy bob ackman credit. they are absolutely relentless in their pursuit of this Pyramid scheme. LOL Keep it up boys. Keep the pressure on them. something might break sooner or later. Of course the defenders (those pocketing nice coin from the pyramid scheme) are just as relentless. I think it will boil down to regulatory interventiion (barring a real legal or accounting problem that always is hanging out there). And I do not think regulators are going to intervene. they are just big #$%$'s.
is REGULATORY or MAJOR LEGAL intervention. That would cause the price to plummet. That is a lower probability event imo but still possible. Maybe something on the order of 20% in the next six to twelve months. A more likely risk factor that will manifest itself is just the natural slowdown of a saturated market and the increasing difficulty to attract more suckers into the pyramid. That will be a slower decline but still a decline. Maybe China can keep it pumping for a while but the other mature markets will see significant slowdowns and in some cases out and out declines in revenues and number of new suckers recruited. Stock price is fully valued here given those risk factors. And a lot riskier than most longs are giving credit to.
I dont know about that but they certainly have way too many people based no the size of the operation and the profitability. I think they should consider a total liquidation of all the assets. I have accumulated some preferred shares and got rid of all my common a while back, and would welcome a liquidation and a near double in preferred share value. In addition, the common would also see some extra cash from a liquidation imo. Management appears absolutely incompetent and has demonstrated that over the last several years. They may have inherited problems but by loading up on unneeded personnel and executing poorly they have exacerbated the problems. And yes fiduciary responsibililty and liability for officers and directors is becoming increasingly probable if they don't take drastic action NOW. If I thought management had any clue what to do I would be interested in common at these prices but these guys have shown the uncanny ability to waste away value. Wonder what the Argentine connection thinks of these operators?
The basic problem, and the BIG LIE, with this and similar MLM's is that distributors are being hired or recruited to SELL these products in a direct sales situation. That is NOT the case. They are being recruited to RECRUIT others into the pyramid. So there is zero possibility of making any money selling at retail directly. The ONLY way to make money is to be a successful recruiter and build a down line of other successful recruiters. and here is the key point. None of the new recruits have any chance of being a profitable and successful RETAILER OF THESE PRODUCTS. That is the BIG LIE and that is why 99% lose money. Obviously in a pyramid only a very few CAN survive by definition, otherwise the PYRAMID collapses due to sheer size. An MLM pyramid is BUILT ON THE FAILURES, IT IS A KEY COMPONENT TO THE MODEL. So failure is a CERTAINTY FOR ALL BUT THOSE WHO ARE GOOD DECEIVERS AND RECRUITERS.
legitimate nutritional companies do not achieve 128% return on equity and 23% return on assets deployed. It just does not happen. Therefore, something else is going on to achieve those types of returns. Gee, I wonder what it might be? Is it their patented product line. NOPE they only have one patent and sell commodity products. Could it be their loyal customer base. NOPE they have exceptional turnover in so called "customers", little branding and no advertising. Gee what could it be then. Oh yea, maybe it is the fraud perpetrated on millions of new distributors each year to pay way more than warranted NOT for the product BUT for the "business opportunity" which does not materialize for 99% of them. Yea, I think that is it.