Bill Ackman, CEO of Pershing Square Capital Management, spoke with Bloomberg Television’s Erik Schatzker and Stephanie Ruhle about Herbalife (HLF) and said that “this is the highest conviction I have ever had about any investment I have ever made, full stop.”
Ackman also said, “We welcome them suing us” and “I think short selling is a very noble thing.” Excerpts from the interview can be found below, courtesy of Bloomberg Television.
Ackman on the size of his position in Herbalife:
“It is enormous. It is over 20 million shares…We are short over 20 million shares.”
On who is responsible and whether Herbalife executives are guilty of a crime:
“I would rather rely on the regulators and our government and the courts to decide ultimately who is responsible. The highest ranks of the company precisely understands what they are up to.”
On why the FTC hasn’t done more:
“I believe the FTC does not like this company. That is my guess. I do not know for sure, but we have given the FTC a lot of information that they would like to see in getting a better understanding of this company. I would be shocked if the FTC does not watch our presentation that we will have on the web and make available publicly as well as a video of the presentation as well as the actual presentation itself. We will make ourselves available to regulators to make them understand what has happened here. The regulators are beyond the FTC. I would include the SEC. You might say that the new consumer financial protection bureau, what is it for if not to protect–again, the target market here for Herbalife are those who could not have qualified for a subprime mortgage during the crisis and can’t put up a deposit to buy a home. It is a community that does not trust the government and probably doesn’t feel comfortable complaining to the government. I think we are empowering them to come out. I suspect we will hear more from that community as will the regulators.”
On whether he’s prepared to take this to court:
“We welcome their suing us. If they sue us, we get access to inside information on Herbalife that we can prove that we are telling the truth. For me to say a company is a pyramid scheme is something I do not do lightly. This is a company we started analyzing a year and a half ago, this is a company that we have done an enormous amount of work. We will make our work available…I believe that it is a certainty that this company is a pyramid scheme. And I would not say that if I did not believe that to 100% confidence level because I understand the implications of saying publicly that a company is a pyramid scheme if it’s not a pyramid scheme. This is what I believe based on very careful and thorough analysis of every fact we’ve found. There is not a fact we have learned that is inconsistent with this company being a pyramid scheme…This is the highest conviction I have ever had about any investment I have ever made, full stop.”
On why he chose to speak out now as opposed to the New Year:
“When we first started putting the presentation together, six months or seven months ago, we thought it would take a month or two. Finally, I put a line in the sand and I said December whatever, 15th, and ultimately, when you put a line in the sand, that is the way to get people to focus on it. As we started getting closer to December 15th, we realized we weren’t going to make it and we made it December 18th. This is all hands on and we had everyone in the entire organization working on this project, including two of the top law firms in the country, one of the top investment banks in the country helped us with our analysis.”
“Something that is very relevant and one of the reasons why we wanted to be out in front of January, January is what they call requalification month at Herbalife. If you are a Herbalife distributor and a sales leader, you have to buy a certain amount of product by January 31st in order to requalify to get the royalties from your so-called down line–those are the people beneath you in the pyramid. And a lot of that money comes in, as you expect, in the last few days because people are scraping together the money to stay in the scheme, if you will. We wanted to be in front of that. We wanted the world to understand and distributors to understand before they wrote that check what the true facts are about Herbalife.”
On describing money he’s made from the trade as “blood money” and what that says about the business of shorting in general:
“What I meant by that is that a lot of people have been harmed here. We don’t want to be making money while other people have been harmed. We would rather have the money go to people who have been harmed. The mission of the Pershing Square Foundation is to help people, some who have trouble helping themselves…I think short selling is a very noble thing. It’s very difficult. You have enormous critics who say you are shorting the stock because he’s going to make a profit if it goes down. They never think twice if someone buys a stock and then says why he likes it. People don’t view that as a negative activity.”
On Herbalife’s CEO saying the world would be better off without Ackman and whether he’s worried about his safety:
“You know, you have to ask yourself…It is a strange and scary thing to say for the CEO of a NYSE-listed legitimate company. I never had a company react — even look at MBIA. They were very professional…If people are very concerned about their circumstances of the behavior or the decisions they made or if they are operating illegally, that is the kind of thing you might say on international TV. I think it was a very unusual thing for him to say. I am obviously concerned about my personal safety, other people’s personal safety. But when the CEO of a public company makes threatening statements, you have to ask yourself, why would he possibly say something like that?”
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