Pyramid scheme or not, Herbalife is tanking

  |   05 November, 2014   |   427   |   3980

In December 2012, Hedge fund investor Bill Ackman painted a huge bull's-eye on the back of Herbalife, labeling the Los Angeles nutritional supplements company an illegal pyramid scheme and placing a $1-billion short bet against its shares.



Ackman supported his bet with a 334-slide PowerPoint presentation that eviscerated the company in heroic detail. Whether Herbalife's business model is illegal -- ongoing investigations by federal and state authorities have that issue, and others, under scrutiny -- much of what Ackman said at the time appears well-taken today.



So far this year, Herbalife's shares are down about 43% -- including a roughly 20% drop Tuesday (as of this writing) after the company shocked investors with a bad quarterly report and a pessimistic view of the future Monday. Its shares are currently trading below $45. Ackman, whose short bet is thought to have been made at about $50 a share, appears to be back in the black, after having faced a hefty loss when the stock reached the low $80s earlier this year.