Bill Ackman has said he will go "to the end of the earth" to bring down Herbalife. Tomorrow, he will take the fight to China.
The hedge fund billionaire plans to unveil new evidence Tuesday that he says shows Herbalife (HLF), which sells nutritional supplements through a network of independent distributors, is operating in violation of Chinese law.
Pershing Square Capital Management, Ackman's $11 billion hedge fund, will release a report showing that Herbalife's business in China is run "as a pyramid scheme," according to a press release issued last week.
Ackman first called Herbalife a pyramid scheme more than a year ago when he disclosed a $1 billion bet the company's stock price will fall. So far, the trade has not worked out. Herbalife shares are up nearly 60% over the past 12 months, leading to significant paper losses for Pershing.
But the decision to open a new front against Herbalife in China suggests that Ackman has no intention of backing down. He told Bloomberg TV in November that he was prepared to "go to the end of the earth" to win his bet.
Ackman argues that Herbalife makes its money by selling products to distributors, who in turn sell to other local sales people, rather than actual end users. He has accused Herbalife of targeting Latinos in the U.S. as an attempt to exploit immigrant communities.
For its part, Herbalife says its business practices are no different than other "multi-level" marketing companies, such as Avon (AVP) and NuSkin (NUS). The company has dismissed Ackman's claims as unfounded and motivated by profit.
But Ackman has used aggressive tactics to draw attention to what he says is "an inherently fraudulent company."
According to a report Monday in the New York Times, he has funded letter-writing campaigns and grass-roots groups to rally support for his cause. He has also lobbied members of Congress, including Senator Ed Markey, a Democrat from Massachusetts, who called on regulators to investigate Herbalife in January after receiving complaints from constituents.
Herbalife noted Ackman's lobbying in a statement Monday.
"Another day, another baseless attack from Bill Ackman," a spokeswoman for the company said. "Having failed to make his case on Wall Street, he took his fight to Washington, DC and the states. Now that those efforts to buy his way to an investigation have been exposed, he is going to China. We are confident in the strength of our consumption based business model in China."
But when it comes to buying influence in Washington, Herbalife appears to be outspending Ackman.
The company, which had $4.8 billion in sales last year, spent nearly $2 million on federal lobbying in 2013, according to filings cited by Reuters. By contrast, Pershing spent $264,000 on lobbyists last year, the report states.
Meanwhile, another big-name hedge fund manager has taken up the other side of Ackman's bet.
You're doing better Sony (SNE), but not good enough... yet.
That's the latest message from Dan Loeb, the firebrand hedge fund manager known for vociferously agitating for changes at some of the world's largest tech firms.
In a sign of "increased confidence," Loeb's Third Point hedge fund increased its stake in Sony to 70 million shares, or roughly 7%, from 6% in May.
Related: Hedge fund targets Sony for spin-off
At least part of MOREMaureen Farrell - Jun 18, 2013 2:36 PM ET
Shares of Herbalife (HLF) bounce back from a sharp drop Monday morning after the New York Post reported that the company is the subject of a federal investigation. Herbalife's stock fell nearly 13% shortly after the open but finished the day up more than 1%.
The investigation was revealed after the Federal Trade Commission disclosed a list of 192 complaints against Herbalife from the past seven years in response to a Freedom of Information Law request MOREHibah Yousuf - Feb 4, 2013 4:01 PM ET
The activist investor that helped usher in the Marissa Mayer-era at Yahoo (YHOO) has a new target: Murphy Oil (MUR).
It's not a household name like Yahoo, but Daniel Loeb, the founder of hedge fund Third Point, called the oil and gas conglomerate an undervalued stock. In his third quarter letter to investors, Loeb outlined a case where the stock could pop if management chose to sell certain assets and spin MOREMaureen Farrell - Oct 5, 2012 2:44 PM ET
Maureen Farrell - Aug 15, 2012 3:26 PM ET
Even billionaire George Soros caught Facebook (FB) fever this spring.
The hedge fund manager purchased 341,000 shares of the social media company during the second quarter, according to SEC filings.
Hedge fund managers aren't forced to specify when during a quarter they purchased stakes in various firms. Still, it's safe to say that the investor who infamously made $1 billion shorting the British pound is under water on his Facebook bet.
Related: Warren MOREMaureen Farrell - Aug 14, 2012 7:13 PM ET
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