Ackman goes after Herbalife's nutrition clubs

Bill Ackman
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Activist investor Bill Ackman once again denounced weight loss and nutritional supplements company Herbalife as a pyramid scheme, but Wall Street shrugged off his criticism and sent the company's stock soaring 26 percent.

In a three-hour presentation in New York Tuesday, Ackman focused on Herbalife's "nutrition clubs," - private settings where Herbalife distributors sell the company's products such as weight-loss shakes and recruit new members.

Ackman laid out a case that because the clubs run by Herbalife's distributors focus on recruiting instead of selling products, the clubs are by definition a pyramid scheme.

Ackman runs Pershing Square Capital Management, an activist hedge fund. He's bet heavily against Herbalife by using "short" trades that will be profitable if the price of the company's stock falls. Ackman has been trying to convince other investors to take similar positions.

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