Is Herbalife Ltd. (HLF) Business Fair, Legal? Bloomberg TV’S Greeley Throws Light on Bill Ackman’s Comments

In its weekly programming segment, Business Week, Bloomberg TV’s Brendan Greeley shared with the viewers, a complete low down on global nutrition company Herbalife Ltd. (NYSE:HLF) which has been grabbing negative headlines on business magazines in the past few months, after billionaire investor and manager of Perihing Square Bill Ackman made caustic comments about the $4.8 billion market cap firm’s business model and made a billion dollar bet that the company would fail in the near future.

Mr. Greeley explained to his viewers the major differentiating factors between Herbalife Ltd. (NYSE:HLF) and GNC Holdings Inc (NYSE:GNC) which are publicly traded companies and also sell similar nutrition products. The report goes on to spell out that

“Herbalife Ltd. sells nutritional supplements like Vitamins, shakes, things that make you skinny. GNC Holdings Inc (NYSE:GNC) is a company that does the same thing. But there is an important distinction, GNC sells through stores to people who want to buy vitamin shakes whereas Herbalife Ltd. (NYSE:HLF) sells to people through distributors, who then find their own customers”.

Mr. Greeley then went on to compare the quarterly revenue generated by the two companies to better illustrate the difference between Herbalife Ltd. (NYSE:HLF) and GNC Holdings Inc (NYSE:GNC) for viewers. He pointed out that GNC Holdings Inc (NYSE:GNC) revenue has a lot of variations which are determined by its customer buying patterns, where as the revenue of Herbalife Ltd. (NYSE:HLF) has much less variations since, the customers of the Cayman Islands head quartered firm are not people who want to lose weight, but are those people who want to start a business.

He then went on to answer his own questions whether Herbalife Ltd. (NYSE:HLF) business is fair and illegible by stating that the business is not fair, but is legal. He explains that, the customers/distributors of Herbalife are forced to take on risks associated to setting up store fronts, marketing, holding inventory.

Further the report goes on to speculate that the business is probably legal, even though law enforcement agencies have recorded in recent times complaints about the company overstating the upside of the business to its distributors and then refusing to buyback unsold inventory from them.

The report finally concludes that the reason why the company is attracting headlines over the past 18 months is due to the fact that self made billionaire Bill Ackman is short on Herbalife Ltd. (NYSE:HLF) and has gone public with his opinion that the business model resembles a pyramid scheme.

Disclosure: none