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Herbalife CEO Michael Johnson better have a Plan B.
After an impassioned two-and-a-half hour defense of his company before roughly 100 investors — and a rapt Wall Street watching live streaming of the meeting — Johnson couldn’t convince skeptical shareholders.
Shares of Herbalife — which spiked about 7 percent as the meeting climaxed — fell 1.8 percent at the 4 p.m. close of trading.
Johnson called the meeting in hopes of clearly and indisputably rebutting claims of activist hedge fund investor Bill Ackman that Herbalife — a distributor of nutritional supplements and weight loss shakes — is a classic pyramid scheme.
The Dec. 20 attack by Pershing Capital founder Ackman — who said the 32-year-old company deserved a regulatory beat down — sent Herbalife shares tumbling.
The certainty of Ackman’s claims — plus his $1 billion short of Herbalife’s shares — caught the attention of Wall Street.
When, days later, rival hedgie Dan Loeb amassed a $270 million long position and trashed Ackman’s thesis, it turned Herbalife into the most watched and talked-about company on the Street.
One of the two is going to lose a lot of cash over distinctly different opinions on the $4 billion company.
After the meeting at the Midtown Four Seasons Hotel, Ackman said Johnson “distorted, mischaracterized and outright ignored” the heart of his attack.
Ackman promised to release a “detailed” series of questions in the near future.
Those questions may very well end up being bandied about in court as rumors swirled that Herbalife, which has retained famed litigator David Boies, was ready to sue Ackman.
Boies attended the meeting, as did Third Point’s Dan Loeb, who has taken an 8 percent stake in the company.
Ackman, too, has lawyered up — and is almost egging Herbalife to sue him.
Ackman feels Herbalife is unwilling to open up that can of worms because it would have to divulge dicey financial data, sources said.
Herbalife was non-committal on its plans.
“We’re exploring all our options,” Herbalife president Des Walsh told The Post in an interview.
“When we use the term that we believe there were gross misinterpretations, that represents our thinking,” he said.
If Herbalife could prove facts were willfully misconstrued and that it lost business as a result of Ackman’s campaign, it could have a case for defamation, slander and tortious interference, said sources.
“Many are questioning, ‘How could Ackman, after purportedly spending a year on the research, have gotten so much, so wrong? Well, one possible answer would be that he did it on purpose,” said Robert Chapman of Chapman Capital and one of the most outspoken Herbalife bulls. “If his research was 100%, ‘best-idea-ever’ thorough, it couldn’t have been by accident.”
“Herbalife did not respond to our identification of overstatements and inaccuracies in the company’s earnings statement for distributors, which among other deceptions, excludes the 93 percent of distributors that have zero gross earnings,” said Ackman in his statement.
“We cannot give an exact breakdown in terms of the percentage of sales in terms of distributor versus nondistributor customers,” Walsh told The Post. “We don’t have that visibility.”
“They could, if they wanted to,” said Douglas Brooks, a lawyer who has led three class-action suits against Herbalife.
“Contractually they require distributors to keep sales records. Why not ask them to send in sales receipts?” he asked.