So waaaay back in April 2012, Herbalife $HLF was trading in the 70s after a great run-up since December (really been on a nice trend up for years.) Now, I don’t know anything about Herballife other than they sell vitamins or supplements or something and they have large building in SoCal that I see when I am down there. But I recall it has been around for quite some time and I have never heard anything bad about it.
Then on their latest earning conference call, David Einhorn asked some questions. And the stock tanks 20-25 points instantly because everyone thinks he is short it. Then it turns out, apparently, that he is actually NOT short the stock but a different stock completely unrelated to HLF based on his presentation at the Ira Sohn Investment Conference yesterday. The stock went up following his presentation, but not nearly as much as it got driven down. Driven down not on fundamentals. But on innuendo.
I don’t like to short stocks. Which is funny because I “grew up” in the stock market working for a very big bear. But they looked for companies that were involved in funny business. And found quite a few with “creative accounting”. But the idea of shorting companies simply because they are down that day (see assclowns that shorted airline companies after 9/11) is not for me. I know things run up for no reason and taking advantage of the downturn is logical. But as a generally positive person, unless contemplating humanity that is, I like to look for things going up, not down.
I’m not supporting HLF. And they might have questionable multi-level marketing schemes. Like I said, I know nothing about them. But I find it gross that a company’s stock price can be basically manipulated that much to the downside based on innuendo and rumor due to a well-known short seller simply asking questions on their conference call. Also, see Bear Stearns.
Not OK.
9:42 am on May 17th, 2012
Herbalife is Amway, which always has been MLM, and should never be trusted. You are wise to raise your defenses.
9:59 am on May 17th, 2012
Like I said, I don’t know anything about them or wish to invest in them. Just think it’s wrong that the market can be moved like that. Although, hasn’t Amway been around forever?
12:32 pm on May 17th, 2012
I don’t think there’s anything wrong with MLM companies, actually. Avon and Mary Kay are MLM and they’re top American companies (ok, maybe “were”).
And my understanding is that both Amway and Herbalife have polarizing brands – people hate ’em or love ’em. I think they present an interesting way for product to get to market without the traditional process of trying to get distribution online or via brick & mortar.
Re stock prices: that’s what scares me about stocks – it’s so much based on emotions vs. hard facts. But I guess if it weren’t, more people would “play” :)