Andrew Ross Sorkin: Maybe Bill Ackman Was Right On Herbalife
The feud between Herbalife Ltd. (NYSE: HLF) and activist investor Bill Ackman has presented itself with a clear winner and loser over the past few years, right?
Ackman's short thesis on Herbalife hasn't panned out. He accused the company of operating as an illegal pyramid scheme and believed a short position in the stock would reap tremendous profits.
The Federal Trade Commission ruled in favor of Herbalife in mid-July. However, the New York Times' Andrew Ross Sorkin suggested that while Ackman lost a lot of money on the trade, he has won a moral victory.
According to Sorkin, Herbalife isn't exactly a model corporate citizen. In fact, he quoted the FTC's head, Edith Ramirez, who essentially repeated what Ackman has been saying for years.
Ramirez said in a press release that Herbalife was responsible for "deceiving hundreds of thousands of hopeful people." She added that Herbalife presented a "dream" to its distributors, the vast majority of whom "found they could make little or no money selling Herbalife products."
Sorkin also suggested that activist investors, particularly those that are very public and vocal on a short position, do serve as an example of an "investor acting as a check on the market."
After all, if Ackman didn't spend $50 million on his short campaign and lobbied regulators and U.S. lawmakers to take a deep dive look into Herbalife's business, then who would?
Bottom line, Ackman's "victory" is "considered hollow because he has so far lost money on his bet against Herbalife."
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