Herbalife gains as Ackman presentation fails to convince

Herbalife Ltd. shares rebounded as much as 10 percent, as hedge-fund manager Bill Ackman struggled to convince investors that the seller of weight-loss shakes is guilty of fraud.

Speaking during what he’s billed as the most important presentation of his career, Ackman said he estimates that the company’s nutrition clubs lose $12,000 per year, on average.

He didn’t specify how he came to that conclusion. The presentation, which comes a day after Ackman compared Herbalife to Enron Corp., is ongoing.

Ackman’s firm, Pershing Square Capital Management LP, which is positioned to profit from Herbalife’s falling share price, investigated 240 of the company’s clubs in several countries. The fund has spent $50 million in a nearly two-year campaign to shut down Herbalife.

Herbalife’s gains also followed the release of an economic analysis by the company showing that it’s not a pyramid scheme as Ackman asserts. According to the research by Walter H. A. Vandaele, an economist at Navigant Economics LLC, 97 percent of Herbalife’s products are purchased for end-use consumption, Herbalife said.

The stock rose 6.3 percent after gaining as much as 9.7 percent earlier. After Ackman made television appearances yesterday, the shares had dropped 11 percent.

Ackman, whose campaign has included lobbying regulators to close Herbalife, initially sold short $1 billion of Herbalife’s shares before restructuring his investment with options, details of which he has declined to disclose.

Pershing accuses the company of misleading distributors, misrepresenting sales figures and selling a commodity product at inflated prices. Regulators including the U.S. Federal Trade Commission and law enforcement are investigating the allegations.

“We have complete confidence in our compliance as it relates to regulations,” Herbalife Chief Financial Officer John Desimone said in an interview with CNBC ahead of Ackman’s presentation. “The FTC inquiry will actually be something that puts this behind us. There’s a lot of misinformation out there in the marketplace.”

Ackman said on Bloomberg Television yesterday that his firm will turn over the findings detailed today to regulators.

“This has been 18 months of always the bark is worse than the bite,” Desimone said ahead of the presentation. “Everything’s a gotcha until it’s not a gotcha.”