Are These Signs Pointing to Endgame for the Herbalife Saga?

There is no doubt that we’re approaching endgame in the Herbalife saga.

I wrote a couple of months ago that I expect the whole saga to be behind us sometime in the coming 5 months.

But who knows – I’ve been wrong before and I’ll be wrong again.

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Regardless, Herbalife’s PR team remains “freaked,” to use the term Bill Ackman quoted me on during the last presentation.

Rather than simply releasing their retail sales (if you don’t get it by this point, they don’t have them), the company has engaged in the act of misdirection by issuing a shitload of worthless press releases (this one especially takes balls: “Herbalife CEO Michael O. Johnson Statement Marking Hispanic Heritage Month”) and by creating new websites.

Like an old hoarder on the A&E network, Herbalife is dealing with their issue not by addressing the fundamental underlying issues, but by hoarding and replacing the facts with worthless websites and press releases.

It used to just be good ole’ Herbalife.com and a PR or two a month.

Now, in addition to that one website we have goherbalife.com (site for online sales), Herbalife24.com (the new PR gag), and iamherbalife.com (the first anti-Ackman PR site that I systematically dismantled here).

Here’s a chart I made this evening that shows the amount of press releases Herbalife has put out by month since 2011. Notice anything?

prs

In terms of misdirection, the company could give Penn and Teller a run for their money. You know, if Penn & Teller hadn’t already labeled the MLM industry “Bullshit”. 

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In addition to that, my friend Mohan (@venigallas) pointed out some interesting trades in Herbalife today.

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40,000 January $40 puts went off at 3:59PM today and 15,000 $65’s also went off at 3:50PM. The 40’s were bought at the ask, it would appear, and the 65’s were closer to the bid.

The likely scenario, we’ve concluded, is someone in the money on the $65’s (long the puts) sold them to close and bought the $40’s with about half the money. This keeps their bearish position on with more upside at about half the price.

Other theories are that it could be some kind of hedge or a volatility spread.

What’s important is that the options are seeing action – and this can sometimes telegraph news coming down the pipe.

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“What does it mean,” you’ll ask me.

Good question. To me, it means nothing more than something is bubbling under the surface. The price action alone to me is speaking volumes over these last couple of weeks. There hasn’t been a bid in sight for Herbalife, with the exception of yesterday’s trading which seemed to spur off of NuSkin’s rally (their CEO was in NY for a visit the day prior).

sc

Ever since the company missed earnings, it’s been one red candlestick after another.

Could the biggest of the bulls on the company finally be throwing in the towel?

Will Herbalife make earnings in a couple of weeks?

Stay tuned and see. These actions, both Herbalife’s continuing PR mess and the trading of these options, tell me that we could be getting closer to some resolution on this Herbalife case. I’m sticking by my prediction of resolution by February of 2015.

Hope everyone has a nice weekend.

Disclosure: I am positioned well short Herbalife and own puts and calls.

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