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Stock of multilevel marketing company Herbalife Ltd. is still recovering after a well-known hedge fund manager trashed it as a “pyramid scheme” at a New York investor conference last month.
William Ackman of Pershing Square Capital Management presented a 340-page slide show, claiming the company is more about recruiting people to sell its wares, than the wares themselves.
Companies that recruit people to recruit people, and sell products to all their friends, have been around for ages. They’re always so full of that self-improvement schlock and power-of-positive thinking banter that you know they are trying to appeal to the downtrodden.
In the case of Herbalife, it’s a wonder so few people who get involved stop to wonder how they’ll ever compete with the three million others selling Herbalife stuff or with Wal-Mart, selling similar products for much less.
Click here to read my column on Marketwatch. Click here for links to Mr. Ackman’s data and slideshow on Herbalife. And click here to read the thoughts of another hedge fund manager, Robert Chapman, who invested in Herbalife after Mr. Ackman’s attack on the company.
Also, click here for an investors’ perspective on what the Federal Trade Commission does about pyramid schemes: Next to nothing.
Have you had experience with Herbalife? Tell me your story.