The recent $200 million Herbalife settlement leaves us with some open questions about how Herbalife will do in the stock market and what Bill Ackman will do with his short position.
In case you’re not entirely familiar with the concept, a short position is when a broker sells you a stock that they do not yet own. The broker is betting against a particular company, in this case Herbalife. The broker sells you “borrowed” stock at say $50 a share. They are betting that the stock will drop below $50, at which point they will actually buy the stock, at say $40. The broker then makes the difference of the $10 per share; you paid $50 and the broker paid $40. To put it simply, the broker—in this case Ackman—is betting that a company’s stock will decrease in value.
As of July 29, 2016, the stock price for Herbalife is up to 68.15 which is a positive 1.72% change. If you look at the past year, the stock price dropped in January of 2016 then gained over the last six months (up 47.22%). The recent settlement with the FTC coincides with another boost to the stock price. It seems that the market perception of this settlement is that it shows the FTC does not see Herbalife as a pyramid scheme.
Direct Selling News recently ran a special section on which direct selling companies are the best to work for (Direct Selling News, April, 2016). The top companies included Jamberry, Jeunesse, LegalShield, Nu Skin, Team National, USANA and Zurvita. This is a popular topic in both the professional/company consulting world and in academia. The hot words seem to be “employee engagement.” The question for all companies is “How do you recruit and keep talented and dedicated people?”
Satisfaction at work has a long history. The whole notion of a need for human resource departments came out of the 1940s and 1950s with work by theorists such as Maslow and Herzberg. The need for job satisfaction was based on the idea of relieving stress and avoiding boredom. Most people worked in factories in the 1950s. Providing a safe environment and providing ways around boredom (you can only stuff beans into a can for so long) were the key needs.
Today, four-fifths of people work in the service industry. Manufacturing jobs have moved abroad. The nature of work changed. Some have suggested that the new millennial employees have changed. Either way, the business gurus and academics now consider the company challenge to be employee engagement.