Herbalife HLF
The FTC's July 2016 Herbalife complaint and forced restructuring vindicate Pershing's pyramid-scheme short thesis; normalized EPS collapses to $1.42–$2.22, far below the ~$65 share price.
Thesis
Pershing Square's July 2016 Q2 conference call reframes the FTC's July 15, 2016 Herbalife complaint and simultaneous settlement as vindication of its four-year-old pyramid-scheme short thesis. The deck walks through the FTC's core findings — that Herbalife distributors earn almost no retail profit, that compensation incentivizes qualification buying rather than genuine consumer demand, and that nutrition clubs exist to recruit — and maps them onto Pershing's prior research. It argues the settlement's terms (compensation limited to verifiable Profitable Retail Sales, an 80% threshold to preserve current payouts, qualification-purchase ban, independent compliance auditor, prohibition on misleading income claims) will dismantle the pyramid, citing pro-forma normalized EPS of $1.42–$2.22 versus a ~$65 share price. It accuses Herbalife and Carl Icahn of spinning the settlement as vindication, documents distributors already violating the order, and frames the FTC action as a roadmap for regulators in 90 other jurisdictions.
SCQA
Herbalife is a global MLM selling nutrition products through ~4 million distributors; Pershing Square has been publicly short since December 2012, arguing the company operates as an illegal pyramid scheme that victimizes recruits.
On July 15, 2016 the FTC filed a complaint and simultaneous settlement forcing a top-to-bottom restructuring — compensation tied to verifiable retail sales, qualification purchases banned, misleading income claims prohibited — confirming Pershing's allegations.
Herbalife must implement the settlement (independent compliance auditor, 80% Profitable Retail Sales threshold, receipt documentation, nutrition-club restrictions), and Pershing maintains its short as the pyramid dismantles.
Pro-forma normalized EPS falls to $1.42–$2.22 against a ~$65 share price — a 29x–46x P/E — with 90 foreign regulators potentially following the FTC template and no credit given for international spillover.
The three reasons
- 1
FTC confirmed distributors earn almost no retail profit — vindicating Pershing's pyramid thesis
- 2
80% verifiable retail-sales threshold and qualification-purchase ban dismantle the pyramid
- 3
Pro-forma normalized EPS of $1.42–$2.22 vs ~$65 implies 29–46x P/E, meaningful downside
Primary demands
- Enforcement of FTC settlement terms against Herbalife
- Restructuring of compensation plan to verifiable Profitable Retail Sales only
- Regulators in other jurisdictions (China, Mexico, EU) should follow the FTC template
KPIs cited
Pattern membership
Precedents cited
- FTC action against Vemma
- Italian regulatory action against Vemma
- Prior action against Herbalife in Belgium
- Pershing Square's own prior Herbalife presentations (2012–2016)
Composition what's on the 46 slides
Slide gallery ·
Notes
Short-seller follow-up deck, not a new campaign — this is the Q2 2016 conference-call presentation reacting to the FTC's July 15, 2016 Herbalife complaint and simultaneous settlement. Classic Pershing blue/navy design with orange/brown accent boxes for before/after framing. Page 9 share-price annotated timeline is the standout viz. Pages 12 and 13 are placeholder slides (video clip, section divider). Deck builds its argument almost entirely by quoting the FTC filing itself and then overlaying Pershing's 2012–2016 prior work — a rhetorical move that lets them frame regulator-as-witness. Strong CEO-quote-contradiction section on page 47 pairing Michael Johnson's past statements against FTC findings. Stake is disclosed only as 'substantial short position' — no percentage given.