Herbalife, the nutritional supplement company under siege in the wake of scathing remarks by activist investor Bill Ackman, is gearing up for a counterattack.
The company — which Ackman blasted as a “pyramid scheme” in a three-hour presentation last week — said it will boost its stock-buyback plan that calls for it to purchase $50 million in stock each quarter. It also hired boutique investment bank Moelis & Co. as a strategic adviser.
The moves, however, did little to stop the bleeding. Shares dropped for a fourth day yesterday, falling 4.4 percent to $26.06.
The stock is down 40 percent since Thursday, when Ackman called the company an unsustainable “pyramid scheme” and questioned its pricing models and products.
In his presentation titled “How To Be a Millionaire,” he said Herbalife makes money off people’s dreams of making money rather than by selling products. Ackman, the founder of hedge fund Pershing Square Capital Management, said he is short more than 20 million shares of Herbalife and that he will continue to short the stock until it hits zero.
“This is the highest conviction I have ever had about any investment I have ever made, full stop,” Ackman told Bloomberg Television in an interview last week.
Herbalife, which has called Ackman’s claims “bogus,” also said yesterday that it will refute his arguments at an analyst meeting Jan. 10 in New York.
The meeting will allow Herbalife executives, including CEO Michael Johnson, to address concerns that Ackman’s statements will attract scrutiny from regulators, including the Federal Trade Commission and the Securities and Exchange Commission.
A spokeswoman for Moelis & Co. declined to comment about its business with Herbalife. Herbalife spokeswoman Barbara Henderson didn’t reply to a request for comment.