Herbalife (HLF) Cuts Ties With Online Recruitment Sites in Effort to Thwart Ackman
According to the NY Post, Herbalife is trimming its approved online recruiter list from something in the double-digit range down to just two. (The Post said the list numbered 29 in 2010.)
Online recruiters sell leads to new distributors, generally at $100 each. The leads are generated from people who sign up over the Internet to learn more about Herbalife's business opportunities. Many of the top distributors are said to have used these sites in the past.
Hedge fund manager Bill Ackman, of Pershing Square, said last December that he was short over 20 million shares of Herbalife. He claims that the company needs "a steady stream" of distributors to keep the business model running.
Herbalife hierarchy has vehemently denied these claims, with one director recently saying Ackman was simply "throwing rocks" to keep his short position alive.
Distributors are prohibited from selling leads or advertising to other distributors, according to Herbalife. The company also said that it doesn't pay for recruitment and distributors are only allowed to do so through a third-party business.
Shares of Herbalife are down about 0.5 percent ahead of the opening bell Tuesday.