BREAKING NEWS: Short seller John Fichthorn of Dialectic Capital announced recently he funded the film Betting on Zero. Dialectic Capital maintains a short position in a direct selling company. In addition, Fichthorn admitted he shorted Herbalife’s stock in 2014, and he said he would “absolutely” consider doing so again. His financial interest in the failure of direct selling companies reveals his true reason for making this “infomercial.”
These newly-revealed facts directly contradict what the director previously told Herbalife and its attorneys about the source of the film’s funding. In fact, the director, Ted Braun, stated emphatically, on multiple occasions and in conversations with multiple people, that the funder was merely a business person interested in financing a series of films about American business and that the funder did not have and never had a financial interest in Herbalife.
Yet, in an interview before the film’s premiere, the director said the “film takes great length to remain independent of both parties,” and that it is his “responsibility to offer the audience some perspective.”
If that’s true, why doesn’t the film disclose that it was funded by someone who was, and may again, short Herbalife’s stock? And why not disclose that this same person is a known critic of the direct selling industry, is presently shorting other direct selling companies, and thus has a financial interest related to the demise of the industry? Why during several meetings with Herbalife prior to production did the director say the funder did not, and never had, a financial interest in Herbalife? Why aren’t any of Herbalife’s 4 million satisfied members featured in the movie? And, why were Bill Ackman, his staff and other known Herbalife detractors the only participants at the premiere and in the premiere’s Q&A?
The reason is clear: the film is merely an attempt to manipulate the stock price of direct selling companies so investors can profit.
Bill Ackman’s Campaign Against Herbalife
In 2012, New York billionaire hedge fund executive Bill Ackman placed a $1 billion short against the global nutrition company Herbalife and ever since then has waged an extraordinary political, public relations and underhanded campaign in Washington and across the country to try to ensure his bet pays off.
Ackman manufactured a misleading grassroots campaign against Herbalife
- During investigations into anti-Herbalife activities, local organizers in Connecticut admitted to media that their efforts were being funded by Ackman. According to NBC Connecticut, “Organizers of the New Britain outreach confirmed…that they are being funded by Ackman.”
- The Hispanic Federation, a Latino focused non-profit, also admitted to the New York Times that it wrote a letter to the FTC only after being lobbied by Ackman’s representatives from Pershing Square. According to the same New York Times article, the consulting firm, Global Strategy Group, working for Ackman, also paid the Hispanic Federation $120,000 to help discredit Herbalife. Other consulting firms have dual roles across the country.
- Fliers used by these anti-Herbalife organizations to make false claims about the company contain similar statements and strike a remarkably similar tone and misrepresentation of facts to public statements by Ackman himself.
- These fliers also contain phone numbers adhering to a uniform format, another indication of a coordinated campaign against Herbalife. Recruitment campaigns using toll-free numbers in New York, California, Nevada and Illinois all use the same formula 855-xxx-5437, demonstrating a coordinated campaign effort.
State attorneys general confirmed that complaints against Herbalife appeared to be fabricated
- In Nevada, former Attorney General Catherine Cortez Masto received three letters from different non-profit groups. Each letter demanded an investigation against Herbalife, were on different letterhead and were signed by different Hispanic community leaders, but the content was identical. According to a New York Times story, when Masto invited groups to meet with her on the matter, “none of them could identify a victim of abusive practices.”
- Similarly, according to other news reports, Connecticut Attorney General George Jepsen disclosed that his office received 26 complaints about Herbalife, however, all of them were investigated and none of the allegations could be substantiated.
Ackman’s campaign has been uncovered by the media and political leaders alike [Click to Tweet]
- “Ackman’s campaign long ago seems to have crossed over from investment strategy into a colossal hubristic quest for vindication.” – Roger Parloff in Fortune (September 9, 2015)
- “Ackman is a smart guy, and perhaps he knows something we don’t. Even so, who made him judge, jury, and executioner? We have healthy—some would say too healthy—regulatory agencies in this country whose job it is to police such things. Do we need a billionaire hedge fund investor in the game as well?” – Alan Murray in Fortune (September 9, 2015)
- “Lately, we have started to see a rise in new activities where an investor takes a short position and then starts an information campaign designed to drive down the price of a stock…policymakers should keep their eyes on the ball to prevent disinformation from creating unnecessary havoc in the markets.” – Tom Quaadman, U.S. Chamber of Commerce, in Investor’s Business Daily (May 27, 2015)
- “Ackman and his lobbyist allies have set the model for the latest iteration of crony capitalism, the dangerous marriage of government and business interests that poses the most powerful threat to our free-market economy…this blatant attempt to manipulate the market is the type of deplorable abuse that gives true free-market capitalism a bad name.” – Erik Telford, Franklin Center for Government & Public Integrity, in The Hill (November 26, 2014)
With Ackman’s financial portfolio down in recent years, he is desperate to do whatever he can to save his bet [CLICK TO TWEET]
- “Ackman, one of the industry’s most widely watched investors, told clients that his Pershing Square holdings dropped 9.8% in February. Losses for the first eight weeks of 2016 are now nearly as high as they were for all of 2015, when the fund lost 20.5%.” – As reported by Reuters (March 2, 2016)
- “Last year , Pershing Square suffered its worst year in its history, losing 20.5%.” – As reported by Business Insider (March 1, 2016)
Ackman’s campaign has threatened the personal safety of herbalife's CEO and others at the company following threats to Their safety
- Since 2012 when Ackman’s attempts to discredit Herbalife began, Herbalife CEO Michael Johnson and his family “began to experience personal harassment and threats.” – As reported in Fortune (March 16, 2016)