6 ms·

After Big Bet, Hedge Fund Pulls the Levers of Power

102 points by kapilkale 13y ago

tphyahoo 13y ago
too meta for me. is herbalife a pyramid or not? nyt won't say. so we get an article about how spin is affecting the article.
adamnemecek 13y ago
tphyahoo: you are shadowbanned.
not_paul_graham 13y ago
Whenever big money is at play, there are bound to be players that will try to influence the market on either side of the trade, so I'm not sure why the NYT reporters are being so one sided in their coverage. One of the other big players on the other side of this trade is Carl Icahn (who owns nearly 15% of the stock) so there is pretty much equal influence if not more to negate whatever Bill Ackman can do. Other investors on the other side of Ackman include George Soros as well as William Stiritz, the CEO of Post Holdings, maker of Raisin Bran. What I would like to add though is that Bill Ackman is extremely thorough before going all out on a bet of such proportions. If he wasn't he wouldn't be in the business any longer than average Joe. Bill Ackman has acknowledged losing $400 million to $500 million on his short position, and I really don't think he is stupid enough to want to lose more money just to stroke his ego. Here is one thing that the author states in the article: Mr. Ackman once made a similar bet against the bond insurer MBIA, one that reaped him and his investors a $1.1 billion return. In a book about his MBIA wager called “Confidence Game,” the reporter-turned-financial analyst Christine S. Richard chronicled how he fought with regulators for SEVEN YEARS before his prediction that MBIA stock would “spiral downward” came true. What this fails to take into state is that if the regulators had been more diligent in following up, they could have helped reign in the massive toxic CDO empire that companies like MBIA enabled that nearly tanked the global economy a couple of years ago. Also MBIA did everything it could to malign Ackman's reputation. He was under investigation for more than a couple of years where he tried to convince the "rating agencies" Moodys, Fitch and the like and the regulators about all that was wrong with MBIA and other such companies. Confidence Game is a good book worth reading to understand how dumb the regulators and rating agencies can be. So ultimately Ackman probably knows more about this than the reporter or the regulators because he binges on tons of information and is pissed that no one is doing anything about it. Similarly to what happened with MBIA. I'd say that he is going to this extent because he is beyond frustrated that others can't see what he can see and he is trying to get others to do the research, and do what is right. He has stated that he will stick to this as long as it takes and so if there is an investigation, and they (Herbalife) come out clean, it'd still be a losing bet for Ackman as he is mainly concentrating his $$ into this trade. If I had to put my money, I'd put it with Ackman, unfortunately I'm still grappling with my student debt to be able to afford making these kinds of bets. In the grand scheme of things, I think Bill Ackman is more like David than Goliath. Sure he has a couple of billion in the bank, but investors like him are why corporate executives aren't partying like they used to in the 50s/60s/70s/80s and are becoming more accountable to shareholders (albeit very slowly). I'd go so far as to say that if Paul Graham was in the business of funding hedge fund managers, Ackman would be one of his top picks from the applicant pool. Also to add more context: Ackman outspent by Herbalife in lobbying battle [1] Hedge fund manager William Ackman, who is betting $1.16 billion that Herbalife is a fraud, spent $264,000 last year on lobbyists to press his case against the company, according to government documents filed in recent weeks. THAT AMOUNT IS DWARFED BY THE NEARLY $2 million Herbalife spent in 2013 on federal lobbying as the nutrition and weight loss company fought the billionaire investor's claims it runs a pyramid scheme. In an illegal pyramid scheme members earn more for recruiting new members into the scheme than for selling the products outside the network. And Ackman isn't alone in thinking that Herbalife is a pyramid scheme [2]. Disclaimer: This is my opinion, and as such all I know about Ackman is from the press, reading his report/book called "Is MBIA Triple A?", the book mentioned in the article "Confidence Game", his talks/interviews/tv reports and second hand articles on the web. [1] http://www.reuters.com/article/2014/03/09/us-herbalife-idUSBREA280OH20140309 http://www.reuters.com/article/2014/03/09/us-herbalife-idUSB... [2] http://en.wikipedia.org/wiki/Herbalife#Pyramid_scheme_allegations http://en.wikipedia.org/wiki/Herbalife#Pyramid_scheme_allega...
- tim333 13y ago
  It's quite an interesting battle. There's a lot of personal hate between Ackman and Icahn. While I think Ackman is on the side of good I'm not sure he'll win.
- gloverkcn 13y ago
  I agree that the article is disappointingly one-sided. Both sides of this case highlight a lot of things that are going wrong with the country. Corporations are more important than people and if you have money you get to live by a different set of rules. Bill is smart. He saw that Wendy's had a division that was taking off (Tim Horton). A successful division can bring a lot of money into a company to offset other struggling divisions, and provide fuel for further growth. Bill invested in Wendy's, go them to spin off the division, getting bill a huge win in the IPO, and then he dumped the Wendy's stock. He is a new breed of corporate raider who wants to take as much money from a company and then bail. Bribing politicians to try and force a stock to collapse is market manipulation and is illegal. If any of the hedge funds he told about the non-public letter affecting a public company acted on that knowledge then that is insider trading and illegal. Trying to convince other hedge funds to bet against a stock could also be seen as a market manipulation (Since if the other hedge fudges take positions against the price would drop). If I were to open a betting pool in vegas on what hedge funds were going to be shut down and the partners put in prison, and then bribed the SEC to investigate to make sure I win am I in the wrong? Or am I just a savvy investor?
  - not_paul_graham 13y ago
    > Bribing politicians to try and force a stock to collapse is market manipulation and is illegal. I really don't want to get into a flame war, but can you please explain where you got the impression that politicians were bribed by Ackman? Lobbying != Bribing. > If I were to open a betting pool in vegas on what hedge funds were going to be shut down and the partners put in prison, and then bribed the SEC to investigate to make sure I win am I in the wrong? Firstly I'm not really sure whether you are being serious, because the SEC isn't an organization that you can just "BRIBE". I'm not talking about the past but the current day, and nothing remotely suggests that you can bribe the SEC. Believe me with the amount of money at play, bad actors in the SEC would be soon found out. Besides it is more lucrative for lawyers/accountants of the SEC to join the dark side (corporate law & accounting firms) instead of accepting bribes while at the SEC. You have the right to state / make your complaints to the SEC (with evidence) and it is up to them to investigate whatever they deem investigation worthy. Also, I feel that that talking about Wendy's or attacking Ackman's profession adds nothing to this discussion. Dumping stock is quite similar to early engineers of a IPO'ed startup cashing out. That is what you (mostly) do when you want to capture the upside of your position; you close it down when the upside is still there.
rayiner 13y ago
Fighting herbal supplement companies and for profit colleges? Is this guy supposed to be the villain, or a hero?
- pessimizer 13y ago
  He's a hero in my book. He shorted a company because he vastly overestimated the interest that the government and the business community would have in exposing and rectifying an open scam that preys on the ignorant. Now he has to become an activist to save that investment. Money where his mouth is. His history with MBIA: https://en.wikipedia.org/wiki/MBIA https://en.wikipedia.org/wiki/MBIA "Ackman [...] called for a division between MBIA's bond insurers' structured finance business and their municipal bond insurance side, despite statements from the insurance companies that this would not be a viable option. "He argued that the billions of dollars of CDS protection MBIA had sold against various mortgage backed CDOs was going to be a problem. He also argued that it was not proper for MBIA, which was legally restricted from trading in CDS, to instead do it through a second corporation, LaCrosse Financial Products, which MBIA described as an 'orphaned subsidiary.' Ackman bought credit default swaps against MBIA corporate debt as a way to bet that it would crash. When MBIA did, in fact, crash as the financial crisis of 2008 came to a head, he sold the swaps for a large profit. Ackman reportedly attempted to warn regulators, rating agencies and investors about the bond insurers' high risk business models."
javert 13y ago
People in every sphere of activity (business, etc.) will find every way to exploit the government (and thus other people), and do so. Two options: (1) End independent spheres of activity (2) Fix the exploits Option #1 is an authoritarian state, option #2 is a state that recognizes individual rights (i.e. non-aggression) in principle on every issue.
- deleted 13y ago
  [deleted]
unsigner 13y ago
Herbalife, a company that sells vitamins and other health supplements through independent distributors, many of whom are lower-income Latinos or African-Americans. That's one way to put it, yes.
- Maascamp 13y ago
  What's another way?
  - bertil 13y ago
    I’m guessing challenging the health benefits brought by their products, or the scientific background of their users and comparing the overall business model to… say snakes marinated in oil.
  - girvo 13y ago
    Pyramid scheme selling entirely unproven crap.
    - MaysonL 13y ago
      The same could be said of any religious organization, and sometimes is, with about as much validity (i.e.: somewhere between a little and a lot).
- Pxtl 13y ago
  How does Herbalife differ from Amway or Cutco or any other direct-marketing company? Snake-oil seems to be the modus-operandi of that marketing channel. I mean, if you're going to talk about the suspicious benefits of herbal health supplements, let's look at the beauty-product industry too.
  - wpietri 13y ago
    I think that demanding that people look at every wrong thing at once mainly acts to reduce the amount of effective action against wrongness.
coldcode 13y ago
I don't care much for Herbalife, but people like this disgust me, covering up a naked profit grab with an air of concern for others. Pathetic. Do it without making a profit and I might listen or even agree with you. Do it for the money and it's clear you don't care a whit what happens as long as your profit is assured. But historically wealthy business people have always convinced, conned or even bribed people (you can bribe people without money) to get what they want. Think late 19th century "robber barons". It's nothing new today, except lobbying is even easier since it's also a big business today. Not a big fan of Icahn either, he bets on companies and then uses any means necessary to force the company to do what he wants in order to profit. The spirit of Rockefeller lives on.
- erikpukinskis 13y ago
  To play devil's advocate... maybe shorting stocks is actually a sensible way to fund activism against unethical companies. It's not unprecedented. The "No win no fee" structure common in class action lawsuits is roughly equivalent. If someone wanted to actually put this into practice, the thing to do would be to create a fund and identify several companies doing illegal things, short the stocks, and then launch campaigns against them. I'm not sure if the math works out though. With traditional VC your wins are orders of magnitude larger than your losses, which is what allows the portfolio to succeed. I don't know enough about shorts to know whether a similar structure could be created.
  - kkowalczyk 13y ago
    Acman's behavior is not bad because he's shorting Herbalife. It's bad because after he bought short position, he's using his money and influence to crash Herbalife, by any means necessary, buying fake concern from various "community" groups, trying to influence government officials to start investigation etc. Metaphorically speaking, he's a corporate terrorist, trying to cause distress in a company in order to profit from it. And let's be clear: he doesn't care what happens after (potentially temporary) drop in Heralife's stock price. He's end-game is not fixing Herbalife via some government action, all he needs to make his billions is temporary drop in stock price caused by FUD that an investigation would create.
mathattack 13y ago
The team includes lobbying firms run by two former members of Congress: Toby Moffett, a Democrat who once represented Connecticut, and Robert S. Walker, a Republican from Pennsylvania. Mr. Ackman also hired firms run by former top White House aides for President Obama and President Clinton. Jim Papa, who handled legislative affairs for the Obama White House, also joined the effort, with his firm, Global Strategy Group, a longtime consultant to Mr. Ackman. Reading stuff like this really gets me sick to my stomach.
candybar 13y ago
This seems like a good balancing act. The levers of power are already available for crooks trying to prop up billion dollar empires. Why shouldn't they be available for those who are trying to expose the crooks and take them down?
sharemywin 13y ago
The problem is there are already alot of rules setup to help the little guy from getting taken advantage of. goverenment required return policies. multiple states require you to register your business opportunity. rules aaginst front end loading. When Amway got sued the industry cleaned up it's act alot. Also, alot of ditributors are people that buy the product at "wholesale" or a more reasonable price. Now why you think your going to make lots of money selling something everyone else is selling flappy bird knock offs I'm talking to you.
jgalt212 13y ago
My problem with Ackerman's actions is he's not only going after the bad actors (as he's perceived them) but will cause a ton of collateral damage (Herbalife shareholders). And on top of that nonsense, thanks to the carried interest tax loophole, Ackerman will pay very low taxes on his shenanigans. http://en.wikipedia.org/wiki/Carried_interest#Taxation_of_carried_interest http://en.wikipedia.org/wiki/Carried_interest#Taxation_of_ca...
- MartinCron 13y ago
  Herbalife shareholders are people trying to profit from a predatory pyramid scheme. How are they not bad actors?
  - asdf3 13y ago
    Apparently having _no liability_ is no longer enough and we need to call stock holders victims.
    - MartinCron 13y ago
      First they came for the Herbalife shareholders, and I didn't speak up because I wasn't an Herbalife shareholder.
  - FireBeyond 13y ago
    He’s happy to sell their shares to others. He just wants to do so at a price that’s reduced from now. He has no problem enabling and assisting the bad actors, just in a way that benefits himself.
    - KMag 13y ago
      > He’s happy to sell their shares to others. He just wants to do so at a price that’s reduced from now. You misunderstand how a short sale works. The intention is to buy at a lower price at a later date, not sell at a lower price at a later date. Yes, the way our financial markets work, speculators on both sides must provide liquidity to the markets. However, presumably the net effect of his short selling (and any synthetic short positions he has acquired) is to reduce the stock price, thus reducing profits of Herbalife executives and those who have helped Herbalife raise operating capital by investing in the company in the past. Now, if your contention (edit: "contention is") that selling Herbalife at a low price is an amoral act, that doesn't necessarily mean the converse (buying at a low price) is a moral act. I'm just saying your argument begins with a false premise: that his intention is to sell Herbalife shares at prices below current market price. Also, it's possible for an action to be amoral and its opposite to simultaneously be amoral, but that's a difficult argument to construct well in general. Having argued that it's amoral for him to sell at a lower price in the future, it's difficult to construct an argument that it's amoral for him to buy at a lower price in the future without contradicting your earlier arguments.
frankc 13y ago
This might be the most comically wrong piece of journalism I've read in my entire life. Ackman should be given a medal for what he's doing to this snake-oil selling pyramid scheme. He has even disavowed any personal profit from his investment. He hasn't made any secret of what he's doing. Short selling is a hugely important market mechanism that allows these fraudulant companies to be sussed out. If all the lobbying is disgusting to you, be disgusted with the system that requires it, not Ackman for playing the game. You don't think Herbalife is doing the same lobbying? I almost can't believe this article was published in the New York Times and not on a late night infomercial selling false hope to the downtrodden.
- deleted 13y ago
  [deleted]
- rayiner 13y ago
  What is the really evil lobbying at play here? Telling a Congresswoman that a company has bad business practices and should be investigated by the FTC? His lobbying allegedly consists of: "organiz[ing] protests, news conferences and letter-writing campaigns." This is evil?
  - frankc 13y ago
    The innuendo that interests group and congressman switch their allegiance based on who has paid the most is pretty yucky, but also not Ackman's fault. But no, the general running of a campaign to bring down a terrible company is not a bad thing at all. I was alluding to some other comments here that used the word 'disgusting'.
    - kkowalczyk 13y ago
      Of course it's Ackman's fault - he's the one bribing all those people. He's much bigger problem than people taking the bribes. He's the one trying to exploit the system for financial gain. Of course trying to ruin a company by bribing government officials to begin a witch hunt investigation is wrong if you stand to profit billions of dollars from that witch hunt. Given the enormous profit he'll realize if he's successful in discrediting Herbalife, I can easily discount all of his other arguments as BS. He has no credibility in the matter if billions are at stake. Note that I'm not defending Herbalife. Maybe they are scammy company that should be investigated and regulated more by the government - by that investigation shouldn't happen because a billionaire starts buying politicians, lobbyists and "non-profit" lapdog organizations. US government already has established channel for complaining about unethical companies: Better Business Bureau. They don't need manufactured complaints.

102 points by kapilkale 13y ago

too meta for me. is herbalife a pyramid or not? nyt won't say. so we get an article about how spin is affecting the article.

adamnemecek 13y ago

tphyahoo: you are shadowbanned.

not_paul_graham 13y ago

Whenever big money is at play, there are bound to be players that will try to influence the market on either side of the trade, so I'm not sure why the NYT reporters are being so one sided in their coverage. One of the other big players on the other side of this trade is Carl Icahn (who owns nearly 15% of the stock) so there is pretty much equal influence if not more to negate whatever Bill Ackman can do. Other investors on the other side of Ackman include George Soros as well as William Stiritz, the CEO of Post Holdings, maker of Raisin Bran. What I would like to add though is that Bill Ackman is extremely thorough before going all out on a bet of such proportions. If he wasn't he wouldn't be in the business any longer than average Joe. Bill Ackman has acknowledged losing $400 million to $500 million on his short position, and I really don't think he is stupid enough to want to lose more money just to stroke his ego. Here is one thing that the author states in the article: Mr. Ackman once made a similar bet against the bond insurer MBIA, one that reaped him and his investors a $1.1 billion return. In a book about his MBIA wager called “Confidence Game,” the reporter-turned-financial analyst Christine S. Richard chronicled how he fought with regulators for SEVEN YEARS before his prediction that MBIA stock would “spiral downward” came true. What this fails to take into state is that if the regulators had been more diligent in following up, they could have helped reign in the massive toxic CDO empire that companies like MBIA enabled that nearly tanked the global economy a couple of years ago. Also MBIA did everything it could to malign Ackman's reputation. He was under investigation for more than a couple of years where he tried to convince the "rating agencies" Moodys, Fitch and the like and the regulators about all that was wrong with MBIA and other such companies. Confidence Game is a good book worth reading to understand how dumb the regulators and rating agencies can be. So ultimately Ackman probably knows more about this than the reporter or the regulators because he binges on tons of information and is pissed that no one is doing anything about it. Similarly to what happened with MBIA. I'd say that he is going to this extent because he is beyond frustrated that others can't see what he can see and he is trying to get others to do the research, and do what is right. He has stated that he will stick to this as long as it takes and so if there is an investigation, and they (Herbalife) come out clean, it'd still be a losing bet for Ackman as he is mainly concentrating his $$ into this trade. If I had to put my money, I'd put it with Ackman, unfortunately I'm still grappling with my student debt to be able to afford making these kinds of bets. In the grand scheme of things, I think Bill Ackman is more like David than Goliath. Sure he has a couple of billion in the bank, but investors like him are why corporate executives aren't partying like they used to in the 50s/60s/70s/80s and are becoming more accountable to shareholders (albeit very slowly). I'd go so far as to say that if Paul Graham was in the business of funding hedge fund managers, Ackman would be one of his top picks from the applicant pool. Also to add more context: Ackman outspent by Herbalife in lobbying battle [1] Hedge fund manager William Ackman, who is betting $1.16 billion that Herbalife is a fraud, spent $264,000 last year on lobbyists to press his case against the company, according to government documents filed in recent weeks. THAT AMOUNT IS DWARFED BY THE NEARLY $2 million Herbalife spent in 2013 on federal lobbying as the nutrition and weight loss company fought the billionaire investor's claims it runs a pyramid scheme. In an illegal pyramid scheme members earn more for recruiting new members into the scheme than for selling the products outside the network. And Ackman isn't alone in thinking that Herbalife is a pyramid scheme [2]. Disclaimer: This is my opinion, and as such all I know about Ackman is from the press, reading his report/book called "Is MBIA Triple A?", the book mentioned in the article "Confidence Game", his talks/interviews/tv reports and second hand articles on the web. [1] http://www.reuters.com/article/2014/03/09/us-herbalife-idUSBREA280OH20140309 http://www.reuters.com/article/2014/03/09/us-herbalife-idUSB... [2] http://en.wikipedia.org/wiki/Herbalife#Pyramid_scheme_allegations http://en.wikipedia.org/wiki/Herbalife#Pyramid_scheme_allega...

tim333 13y ago
It's quite an interesting battle. There's a lot of personal hate between Ackman and Icahn. While I think Ackman is on the side of good I'm not sure he'll win.
gloverkcn 13y ago
I agree that the article is disappointingly one-sided. Both sides of this case highlight a lot of things that are going wrong with the country. Corporations are more important than people and if you have money you get to live by a different set of rules. Bill is smart. He saw that Wendy's had a division that was taking off (Tim Horton). A successful division can bring a lot of money into a company to offset other struggling divisions, and provide fuel for further growth. Bill invested in Wendy's, go them to spin off the division, getting bill a huge win in the IPO, and then he dumped the Wendy's stock. He is a new breed of corporate raider who wants to take as much money from a company and then bail. Bribing politicians to try and force a stock to collapse is market manipulation and is illegal. If any of the hedge funds he told about the non-public letter affecting a public company acted on that knowledge then that is insider trading and illegal. Trying to convince other hedge funds to bet against a stock could also be seen as a market manipulation (Since if the other hedge fudges take positions against the price would drop). If I were to open a betting pool in vegas on what hedge funds were going to be shut down and the partners put in prison, and then bribed the SEC to investigate to make sure I win am I in the wrong? Or am I just a savvy investor?
- not_paul_graham 13y ago
  > Bribing politicians to try and force a stock to collapse is market manipulation and is illegal. I really don't want to get into a flame war, but can you please explain where you got the impression that politicians were bribed by Ackman? Lobbying != Bribing. > If I were to open a betting pool in vegas on what hedge funds were going to be shut down and the partners put in prison, and then bribed the SEC to investigate to make sure I win am I in the wrong? Firstly I'm not really sure whether you are being serious, because the SEC isn't an organization that you can just "BRIBE". I'm not talking about the past but the current day, and nothing remotely suggests that you can bribe the SEC. Believe me with the amount of money at play, bad actors in the SEC would be soon found out. Besides it is more lucrative for lawyers/accountants of the SEC to join the dark side (corporate law & accounting firms) instead of accepting bribes while at the SEC. You have the right to state / make your complaints to the SEC (with evidence) and it is up to them to investigate whatever they deem investigation worthy. Also, I feel that that talking about Wendy's or attacking Ackman's profession adds nothing to this discussion. Dumping stock is quite similar to early engineers of a IPO'ed startup cashing out. That is what you (mostly) do when you want to capture the upside of your position; you close it down when the upside is still there.

rayiner 13y ago

Fighting herbal supplement companies and for profit colleges? Is this guy supposed to be the villain, or a hero?

pessimizer 13y ago
He's a hero in my book. He shorted a company because he vastly overestimated the interest that the government and the business community would have in exposing and rectifying an open scam that preys on the ignorant. Now he has to become an activist to save that investment. Money where his mouth is. His history with MBIA: https://en.wikipedia.org/wiki/MBIA https://en.wikipedia.org/wiki/MBIA "Ackman [...] called for a division between MBIA's bond insurers' structured finance business and their municipal bond insurance side, despite statements from the insurance companies that this would not be a viable option. "He argued that the billions of dollars of CDS protection MBIA had sold against various mortgage backed CDOs was going to be a problem. He also argued that it was not proper for MBIA, which was legally restricted from trading in CDS, to instead do it through a second corporation, LaCrosse Financial Products, which MBIA described as an 'orphaned subsidiary.' Ackman bought credit default swaps against MBIA corporate debt as a way to bet that it would crash. When MBIA did, in fact, crash as the financial crisis of 2008 came to a head, he sold the swaps for a large profit. Ackman reportedly attempted to warn regulators, rating agencies and investors about the bond insurers' high risk business models."

javert 13y ago

People in every sphere of activity (business, etc.) will find every way to exploit the government (and thus other people), and do so. Two options: (1) End independent spheres of activity (2) Fix the exploits Option #1 is an authoritarian state, option #2 is a state that recognizes individual rights (i.e. non-aggression) in principle on every issue.

deleted 13y ago
[deleted]

unsigner 13y ago

Herbalife, a company that sells vitamins and other health supplements through independent distributors, many of whom are lower-income Latinos or African-Americans. That's one way to put it, yes.

Maascamp 13y ago
What's another way?
- bertil 13y ago
  I’m guessing challenging the health benefits brought by their products, or the scientific background of their users and comparing the overall business model to… say snakes marinated in oil.
- girvo 13y ago
  Pyramid scheme selling entirely unproven crap.
  - MaysonL 13y ago
    The same could be said of any religious organization, and sometimes is, with about as much validity (i.e.: somewhere between a little and a lot).
Pxtl 13y ago
How does Herbalife differ from Amway or Cutco or any other direct-marketing company? Snake-oil seems to be the modus-operandi of that marketing channel. I mean, if you're going to talk about the suspicious benefits of herbal health supplements, let's look at the beauty-product industry too.
- wpietri 13y ago
  I think that demanding that people look at every wrong thing at once mainly acts to reduce the amount of effective action against wrongness.

coldcode 13y ago

I don't care much for Herbalife, but people like this disgust me, covering up a naked profit grab with an air of concern for others. Pathetic. Do it without making a profit and I might listen or even agree with you. Do it for the money and it's clear you don't care a whit what happens as long as your profit is assured. But historically wealthy business people have always convinced, conned or even bribed people (you can bribe people without money) to get what they want. Think late 19th century "robber barons". It's nothing new today, except lobbying is even easier since it's also a big business today. Not a big fan of Icahn either, he bets on companies and then uses any means necessary to force the company to do what he wants in order to profit. The spirit of Rockefeller lives on.

erikpukinskis 13y ago
To play devil's advocate... maybe shorting stocks is actually a sensible way to fund activism against unethical companies. It's not unprecedented. The "No win no fee" structure common in class action lawsuits is roughly equivalent. If someone wanted to actually put this into practice, the thing to do would be to create a fund and identify several companies doing illegal things, short the stocks, and then launch campaigns against them. I'm not sure if the math works out though. With traditional VC your wins are orders of magnitude larger than your losses, which is what allows the portfolio to succeed. I don't know enough about shorts to know whether a similar structure could be created.
- kkowalczyk 13y ago
  Acman's behavior is not bad because he's shorting Herbalife. It's bad because after he bought short position, he's using his money and influence to crash Herbalife, by any means necessary, buying fake concern from various "community" groups, trying to influence government officials to start investigation etc. Metaphorically speaking, he's a corporate terrorist, trying to cause distress in a company in order to profit from it. And let's be clear: he doesn't care what happens after (potentially temporary) drop in Heralife's stock price. He's end-game is not fixing Herbalife via some government action, all he needs to make his billions is temporary drop in stock price caused by FUD that an investigation would create.

mathattack 13y ago

The team includes lobbying firms run by two former members of Congress: Toby Moffett, a Democrat who once represented Connecticut, and Robert S. Walker, a Republican from Pennsylvania. Mr. Ackman also hired firms run by former top White House aides for President Obama and President Clinton. Jim Papa, who handled legislative affairs for the Obama White House, also joined the effort, with his firm, Global Strategy Group, a longtime consultant to Mr. Ackman. Reading stuff like this really gets me sick to my stomach.

candybar 13y ago

This seems like a good balancing act. The levers of power are already available for crooks trying to prop up billion dollar empires. Why shouldn't they be available for those who are trying to expose the crooks and take them down?

sharemywin 13y ago

The problem is there are already alot of rules setup to help the little guy from getting taken advantage of. goverenment required return policies. multiple states require you to register your business opportunity. rules aaginst front end loading. When Amway got sued the industry cleaned up it's act alot. Also, alot of ditributors are people that buy the product at "wholesale" or a more reasonable price. Now why you think your going to make lots of money selling something everyone else is selling flappy bird knock offs I'm talking to you.

jgalt212 13y ago

My problem with Ackerman's actions is he's not only going after the bad actors (as he's perceived them) but will cause a ton of collateral damage (Herbalife shareholders). And on top of that nonsense, thanks to the carried interest tax loophole, Ackerman will pay very low taxes on his shenanigans. http://en.wikipedia.org/wiki/Carried_interest#Taxation_of_carried_interest http://en.wikipedia.org/wiki/Carried_interest#Taxation_of_ca...

MartinCron 13y ago
Herbalife shareholders are people trying to profit from a predatory pyramid scheme. How are they not bad actors?
- asdf3 13y ago
  Apparently having _no liability_ is no longer enough and we need to call stock holders victims.
  - MartinCron 13y ago
    First they came for the Herbalife shareholders, and I didn't speak up because I wasn't an Herbalife shareholder.
- FireBeyond 13y ago
  He’s happy to sell their shares to others. He just wants to do so at a price that’s reduced from now. He has no problem enabling and assisting the bad actors, just in a way that benefits himself.
  - KMag 13y ago
    > He’s happy to sell their shares to others. He just wants to do so at a price that’s reduced from now. You misunderstand how a short sale works. The intention is to buy at a lower price at a later date, not sell at a lower price at a later date. Yes, the way our financial markets work, speculators on both sides must provide liquidity to the markets. However, presumably the net effect of his short selling (and any synthetic short positions he has acquired) is to reduce the stock price, thus reducing profits of Herbalife executives and those who have helped Herbalife raise operating capital by investing in the company in the past. Now, if your contention (edit: "contention is") that selling Herbalife at a low price is an amoral act, that doesn't necessarily mean the converse (buying at a low price) is a moral act. I'm just saying your argument begins with a false premise: that his intention is to sell Herbalife shares at prices below current market price. Also, it's possible for an action to be amoral and its opposite to simultaneously be amoral, but that's a difficult argument to construct well in general. Having argued that it's amoral for him to sell at a lower price in the future, it's difficult to construct an argument that it's amoral for him to buy at a lower price in the future without contradicting your earlier arguments.

frankc 13y ago

This might be the most comically wrong piece of journalism I've read in my entire life. Ackman should be given a medal for what he's doing to this snake-oil selling pyramid scheme. He has even disavowed any personal profit from his investment. He hasn't made any secret of what he's doing. Short selling is a hugely important market mechanism that allows these fraudulant companies to be sussed out. If all the lobbying is disgusting to you, be disgusted with the system that requires it, not Ackman for playing the game. You don't think Herbalife is doing the same lobbying? I almost can't believe this article was published in the New York Times and not on a late night infomercial selling false hope to the downtrodden.

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rayiner 13y ago
What is the really evil lobbying at play here? Telling a Congresswoman that a company has bad business practices and should be investigated by the FTC? His lobbying allegedly consists of: "organiz[ing] protests, news conferences and letter-writing campaigns." This is evil?
- frankc 13y ago
  The innuendo that interests group and congressman switch their allegiance based on who has paid the most is pretty yucky, but also not Ackman's fault. But no, the general running of a campaign to bring down a terrible company is not a bad thing at all. I was alluding to some other comments here that used the word 'disgusting'.
  - kkowalczyk 13y ago
    Of course it's Ackman's fault - he's the one bribing all those people. He's much bigger problem than people taking the bribes. He's the one trying to exploit the system for financial gain. Of course trying to ruin a company by bribing government officials to begin a witch hunt investigation is wrong if you stand to profit billions of dollars from that witch hunt. Given the enormous profit he'll realize if he's successful in discrediting Herbalife, I can easily discount all of his other arguments as BS. He has no credibility in the matter if billions are at stake. Note that I'm not defending Herbalife. Maybe they are scammy company that should be investigated and regulated more by the government - by that investigation shouldn't happen because a billionaire starts buying politicians, lobbyists and "non-profit" lapdog organizations. US government already has established channel for complaining about unethical companies: Better Business Bureau. They don't need manufactured complaints.