Herbalife is ‘pyramid scheme’: Pershing Square’s Ackman

LOS ANGELES — Hedge fund manager Bill Ackman, best known for taking big positions in stocks in hopes of pushing for management changes, is taking on weight management Herbalife Ltd. as his big end-of-the-year short.

A day after confirming that his $11 billion Pershing Square Capital Management is betting against the company, the manager outlined his case for shorting Herbalife shares in a presentation entitled, “How to be a millionaire.”

During a talk on Thursday before an audience of 500 at an event sponsored by a charitable group, Ackman said Herbalife is a “pyramid scheme” that has “grown remarkably rapidly” without demonstrating “much substance” to justify the growth.

He criticized the company for inflating the suggested retail price of its products and overstating its retail sales in public filings.

Shares of Herbalife, which tumbled 12 percent Wednesday after Ackman confirmed his hedge fund was shorting the stock, fell another 6.4 percent to $34.94 on Thursday morning on the New York Stock Exchange.

On Wednesday, Herbalife CEO Michael Johnson said Ackman’s charge about being a pyramid scheme was “bogus,” and he criticized Ackman for using a public attack on his company to benefit his “business model.”