Herbalife (HLF) Looks to Mitigate Future Distributor Lawsuits
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Could Herbalife (NYSE: HLF) not be as confident in its business model as it once was?
The NY Post on Friday noted that Herbalife is having its new independent distributors sign a contract which reads, in part,
Lawyers for Herbalife said the new wording would only impact distributors that joined the company starting in August 2013. While Herbalife is said to be able to change the rules for distributors at any time, one lawyer whom sued the company in the past said that any changes by Herbalife could invalidate its entire contract with distributors.
News comes following a move late last year by Pershing Square's Bill Ackman, who chided the company and said he took a $1 billion short position. He criticized the company largely for being nothing more than a pyramid scheme, with a good portion of its distributors unable to make money under the company's business model. Earlier this year, activist investor Carl Icahn and Third Point LLC's Dan Loeb took the other side of the trade, while shares of Herbalife also saw upside in the early part of 2013.
While Ackman might be preparing another round of fisticuffs over Herbalife, investors might note recent quarterly results from the company, which saw Herbalife top consensus Q3 EPS views by a whopping 27 cents.
Shares of Herbalife are modestly higher in early trading Friday.
The NY Post on Friday noted that Herbalife is having its new independent distributors sign a contract which reads, in part,
You agree that, by entering into this agreement, you and Herbalife are each waiving the right to a trial by jury ... Class actions shall not be permitted.The contract went into effect in August and requires that the company and distributors settle any disagreements through arbitration.
Lawyers for Herbalife said the new wording would only impact distributors that joined the company starting in August 2013. While Herbalife is said to be able to change the rules for distributors at any time, one lawyer whom sued the company in the past said that any changes by Herbalife could invalidate its entire contract with distributors.
News comes following a move late last year by Pershing Square's Bill Ackman, who chided the company and said he took a $1 billion short position. He criticized the company largely for being nothing more than a pyramid scheme, with a good portion of its distributors unable to make money under the company's business model. Earlier this year, activist investor Carl Icahn and Third Point LLC's Dan Loeb took the other side of the trade, while shares of Herbalife also saw upside in the early part of 2013.
While Ackman might be preparing another round of fisticuffs over Herbalife, investors might note recent quarterly results from the company, which saw Herbalife top consensus Q3 EPS views by a whopping 27 cents.
Shares of Herbalife are modestly higher in early trading Friday.
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