I wrote about Bill Ackman’s possible $ 1 Billion Dollar mistake last Friday (Read Here). On January 5th 2012, Michelle Celarier over at the N.Y. Post wrote a great article covering what Herbalife’s “badass CEO”, Michael Johnson is planning for this weeks investor meeting.
Watch your back, Bill Ackman, Herbalife’s “badass” CEO is coming after you.
Michael Johnson, after seeing shares in his 32-year-old weight management and nutritional supplement distribution company tumble nearly 40 percent after Ackman publicly labeled it a pyramid scheme, is planning to return fire this Thursday.
In an anticipated investor meeting in New York, Johnson, sources told The Post, is likely to wheel out a former Federal Trade Commission regulator — along with a point-by-point rebuttal of Ackman’s plan.
In addition, Johnson, who has been the top dog at Herbalife for a decade after a 17-year career at Disney, could use the company’s connection with former Secretary of State Madeleine Albright to boost its bona fides.
Albright’s advisory firm, Albright Stoneridge Group. has been a consultant to Herbalife since 2008.
Johnson tried to woo Albright to the event — but her firm said she is not going to attend the meeting. Still, her role enhances the firm’s reputation.
The December battle between Ackman and Herbalife — which resulted in $1.8 billion of value being wiped out — captivated Wall Street as Ackman, one of the best-known hedge-fund managers, hit CNBC, Bloomberg TV and other media outlets to publicize his theory.
Herbalife is “the best-managed pyramid scheme in the history of the world,” Ackman crowed.
The New York activist, who has shorted more than 20 million shares of the Cayman Islands-based company, said he expects regulators to eventually shut down the company — and for the shares to hit zero.
The founder of $11 billion Pershing Square Capital told The Post he has not covered nor hedged his short.
Ackman’s certainty has made Johnson’s Thursday morning performance even more important.
Critics of Ackman have already started to pounce.
They say his comments are nothing new. Defining a pyramid scheme is “a very gray area,” said analyst Michael Swartz of Suntrust Robinson Humphrey, noting that the FTC has looked at the company but not acted in Herbalife’s 32 years of existence.
“But when Ackman gets up on a podium, it carries more weight than the average investor,” he added.
Ackman’s power with other investors riles hedgie Bob Chapman, a longtime Ackman foe who recently, after trying Herbalife protein shakes, became an even bigger believer in the company.
Chapman called Ackman “the PT Barnum of hedge funds.”
Chapman thinks Ackman, whose hedge fund he admits has been “extremely successful,” may have met his match in Johnson. Chapman called the Herbalife CEO “a singular American badass” for his aggressive tactics.
Eventually, these critics think Ackman will be forced to cover his short. Herbalife announced a $950 million share-buyback program, which it won’t be able to start until after it announces earnings.
Already, Herbalife shares have popped 42 percent since bottoming out at $26.06 following Ackman’s onslaught — but are still off about 50 percent from the first shots taken at the company by Greenlight Capital’s David Einhorn in a May investor call that triggered a Securities and Exchange Commission inquiry that went nowhere.
Ackman says his “smoking gun” is that the company’s “so-called earnings disclosure statements for the distributors are false and materially misleading.”
Most of the distributors’ income comes from recruiting other distributors, he said, adding that 93 percent of the distributors make no commissions.
Ackman said he is prepared to wait it out, and he can afford to do so. “After all, it took five years for our work on MBIA [the bond insurer he shorted] to be recognized by the market,” said the money manager. “ I think it will take a lot less time here.”