Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Herbalife and Nu Skin Shares Tumbled

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

 Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Herablife (NYSE: HLF  ) and Nu Skin Enterprises (NYSE: NUS  ) took a hit for the second time this week, falling 19% and 14%, respectively, after activist investor Bill Ackman continued to bash Herbalife and, by extension Nu Skin, which operates under a similar business model, in a presentation on his short position in Herbalife.

So what: Ackman gave investors a 342-slide, three-hour presentation yesterday on why he thinks the company is a pyramid scheme, saying that the company's distributors, or salespeople, make more money recruiting new distributors than selling the product. Ackman added that over Herbalife's 32-year history, 1.9 million salespeople have failed to sell the products, which cost them individually $2,000 in training and other costs. A company spokeswoman responded by calling the presentation a "malicious attack" and said it was based on "outdated, distorted, and inaccurate information."

Now what: Herbalife is planning an analyst day in January to respond to Ackman's claims. Over the past three days, the stock has lost more than a third of its value, so management clearly needs to reassure the market about its model. I didn't see Ackman's presentation, but considering the size and history of Herbalife, his remarks seem suspect. Other observers have pointed out that Ackman has been short the stock for a number of months but chose yesterday to make the presentation as he was believed to have a number of put options expiring today. I wouldn't be surprised to see these stocks bounce back after Herbalife's analyst day response.

Stay up to date on this developing story by clicking the link to add these companies to your Watchlist.

Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 23, 2012, at 10:03 AM, bossman5000 wrote:

    This might possibly be the worst, most irresponsible investing article I have ever read. It is an insult to call this article an article, really.

    I actually took the time to read the presentation, unlike yourself. It is freely available online. What a joke. You can't even take the time to click through a powerpoint presentation for 45 minutes to write a more informed article for your audience?

    All this article is is an ad hominem attack against Ackman. Oh ok, given his past history, he's suspect. Great research/ opinion there. Ad hominem attacks are the lowest form of journalism./ communication.

    Shame on you and shame on The Motley Fool for publishing this.

  • Report this Comment On December 25, 2012, at 11:03 PM, firebird09 wrote:

    Bet your short the stock too bossman. What a joke. Can't believe people actually listen to a guy that's presenting an attack on a company which he has shorted heavily. Wonder why people are scared to invest these days. Greedy pigs manipulating the market to get richer. You should be ashamed of yourself bud. Why do people listen and panic to these accusations when the guy presenting is padding his account and best interest. What a joke

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2166965, ~/Articles/ArticleHandler.aspx, 10/25/2016 10:12:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,225.50 2.47 0.01%
S&P 500 2,150.32 -1.01 -0.05%
NASD 5,307.91 -1.91 -0.04%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 9:57 AM
HLF $61.22 Up +0.12 +0.20%
Herbalife CAPS Rating: *
NUS $62.21 Down -0.19 -0.30%
Nu Skin Enterprise… CAPS Rating: **