William A. Ackman is not letting his adversary compare itself to the Girl Scouts.
Mr. Ackman, head of the hedge fund Pershing Square Capital Management, issued a fresh challenge on Thursday to Herbalife, the nutritional supplements company that he is betting against.
In a document posted online, Pershing Square takes aim at Herbalife’s disclosures about its business model. The company, which Mr. Ackman has accused of being an abusive pyramid scheme, sells its products through a network of independent distributors, who turn around and sell to customers or consume the products themselves.
Seeming to leave no statement by Herbalife unchallenged, the hedge fund manager even addressed a comment by Michael Johnson, the chief executive, who compared his company’s model to that of the Girl Scouts.
“When Girl Scouts sell cookies, do 11 levels of ‘upline’ Girl Scouts receive sales commisions Do the top 1 percent of Girl Scouts receive 88 percent of the award badges†Pershing Square asks in the document released on Thursday. “How many former Girl Scouts have sued the Girl Scouts’ organization and accused it of running a pyramid schemeâ€
Mr. Ackman was responding to a presentation by Herbalife last month â€" which itself was a rebuttal to Mr. Ackman’s opening salvo.
In the weeks since, the debate over the company has turned into a high-stakes drama on Wall Street, drawing in prominent investors and even leading to an bitter argument on live television.
In previous responses, Herbalife has cited its long history of sales growth and its compensation plan, which i! t says focuses on product sales, not recruitment.
“Herbalife is a financially strong and successful global nutrition company, having created meaningful value for shareholders, significant opportunities for distributors and positively impacted the lives and health of consumers since our founding in 1980, †Barbara Henderson, a spokeswoman for the company said in a statement. She said Pershing Square was motivated by its “reckless†short position.
Mr. Ackman, however, is still pressing the company for more of a response.
“Herbalife management has repeatedly stated its commitment to total transparency,†he said in a statement. “In response to this invitation, we have prepared a substantial number of detailed questions.â€
The initial questions center on whether distributors make their money primarily from retail sales outside the network or from recruiting other distributors. Citing a statement by the Federal Trade Commission, Pershing Square suggests that that distinctionis important in determining whether the company is a fraud.
“What proof can the company provide that bona fide retail sales (defined as sales to non-distributors) at sufficient profits occur such that Herbalife’s distributors obtain their monetary benefits primarily from sales to independent, third-party retail customers rather than from recruiting rewards†Pershing Square asks.
Over its 40-page document, the hedge fund challenges various aspects of Herbalife’s presentation in January and poses many pointed questions.
For instance, Pershing Square asks Herbalife to release more details about a report by Lieberman Research Worldwide, which used an Internet survey to conclude that the majority of Herbalife’s sales went to people outside the distributor network.
