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Bill Ackman has a lot of questions for Herbalife — as a matter of fact, exactly 284.
The activist hedge fund manager yesterday fired off an exhaustive 40-page questionnaire at the nutritional supplements company that he has attacked as a “pyramid scheme” and is shorting to the tune of $1 billion.
Ackman’s latest salvo, which was a response to Herbalife’s investor presentation last month, included pointed questions but also some offbeat ones:
* Why does Herbalife have ATM machines in Mexico?
* How many Girl Scouts have lost tens of thousands of dollars selling cookies?
* Have any former or current Herbalife executives or distributors ever been involved in money laundering?
The founder of Pershing Square Capital is in a Wall Street brawl over Herbalife that has pitted him against the company as well as fellow hedge fund heavyweight Dan Loeb.
Herbalife sells protein shakes and other nutritional products via a network of distributors who, in turn, sell products to their chain of sales reps.
Ackman and other critics say the Los Angeles-based company depends on a steady supply of new sales recruits to keep it going.
Ackman focused most of his questions on the lack of clarity surrounding the company’s retail sales and product consumption.
He also hammered away at its recruiting practices, what he called “deception and income claims,” and its much-touted “Nutrition Clubs,” questioning if they are forbidden from advertising or selling products to circumvent the law.
Ackman also brought up new issues about product safety at a Lake Forest, Calif., manufacturing facility, and asked if the company was aware of alleged money laundering through a Mexican Herbalife account, which was mentioned in a published report a year ago.
In the presentation posted on his website, Ackman included a photo of an Herbalife-branded ATM in Mexico, prompting him to question why a nutrition company would have cash machines.
Herbalife fired back, saying “Pershing Square’s latest tome is motivated by a reckless $1 billion short bet.”
Ackman’s attack on Herbalife cited a 1986 California injunction that restricts Herbalife from compensating its distributors on anything other than retail sales.
But since the company has repeatedly said it doesn’t and cannot track retail sales, Ackman asked, “How is it possible for the company to be in compliance with the injunction?”
Ackman also mentioned a similar Federal Trade Commission statement on the same issue.
Herbalife investor Robert Chapman countered, saying, “It requires a wild imagination to believe Herbalife has been operating in California since 1986 while in violation of the state’s very own injunction.”
The Street also shrugged off the presentation, sending the stock up 13 cents, to close at $35.92, yesterday.
Finally, Ackman poked fun at Herbalife CEO Michael Johnson’s comparison of its business model to that of the Girl Scouts.
“Do the top 1% of Girl Scouts receive 88% of the award badges?” Ackman asked. “How many Girl Scouts have lost tens of thousands of dollars selling cookies?”