U.S. regulators regard Herbalife Ltd. (NYSE: HLF) as a “multi-level marketing scheme,” but Bill Ackman is beyond euphemisms. To Ackman’s Pershing Square Holdings Ltd, the global nutrition company is a “pyramid scheme.”
And he’s so incensed by Herbalife’s tactics and certain that the business will sink that he’s bet $1 billion against it and precipitated a loss by working to expose the firm’s alleged wrongdoings.
The hedge fund titan’s movement gained momentum mid-March when a new documentary highlighting his crusade hit U.S. theaters.
“Betting On Zero” has been met with widespread approval. After a month in theaters, it now boasts a 72-rating on Metacritic, as well as a 100-percent critic and 74-percent audience score on Rotten Tomatoes.
Here are some highlights from the overwhelmingly positive reviews:
“Betting on Zero makes such a strong and effective case that the company does, in fact, engage in shady business practices that it’s likely to leave viewers in a state of Documentary High Dudgeon (that brand of cinematic outrage that is not entirely unmixed with a pleasurable feeling of moral superiority).” — Michael O’Sullivan, Washington Post
“Even if it tells the age-old story of the filthy rich getting richer and the poor going nowhere, Betting on Zero is still rather shocking.” — Fionnuala Halligan, Screen International
“The situation is heartbreaking and frustrating. But the film is so persuasive that it could help finally tank Herbalife’s shares and validate Ackman’s gamble — possibly preventing thousands of others.” — Daphne Howland, Village Voice
“It may not be entirely inspiring, but Betting on Zero captures the everyone-for-themselves desperation that would make any wronged individual furious, be they jilted employee or frustrated stockholder.” — Steve Greene, Indiewire
Prior to the documentary’s debut, Quoth The Raven Research predicted the film to be a public relations nightmare that Herbalife “may permanently have trouble recovering from.”
In fact, QTR’s Chris Irons expected “Betting on Zero” to be to Herbalife what “Blackfish” was to SeaWorld Entertainment Inc (NYSE: SEAS). SeaWorld shares have sunk 58 percent since the 2013 “Blackfish” release.
“The impact of this movie I think is going to be far greater than anybody is discounting right now on the stock,” he said before the release.
He also predicted activist investor Carl Icahn to exit his Herbalife position — a stake of 22.5 million shares — between the film release and effecting of Federal Trade Commission sanctions in 2017.
So far, none of his prophecies have materialized.
Since the documentary was released March 10, Herbalife shares have only increased in value. The stock has seen a 13.27-percent, $6.89 pop and now rests at $58.85.
Herbalife has been similarly immune to bad news out of the FTC, such as a July order to restructure its marketing operations and repay distributors $200 million.
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Image Credit: By Philafrenzy - Own work, CC BY-SA 4.0, via Wikimedia Commons
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