John Hempton of Bronte Capital has good news for you.
Hempton, an avowed Herbalife bull, is sceptical about whether any inventory loading happened at the company. When a firm requires its distributors to buy lots of inventory, it's one sign of a pyramid scheme, which grows by recruiting distributors instead of actually selling products. Hempton says there probably wasn't inventory loading because the company refunds distributors for unsold products.
A look at Herbalife's website shows that they did offer refunds as of 2014, with one caveat found in a footnote of its pitchbook: "If requested within 90 days for the return of the HMP [Note: That's the Herbalife Member Pack, a starter pack] and one year for the return of resalable inventory, upon leaving the business." That's a conditional refund, to be sure.
Still, Hempton has been hunting for the telltale distributors with tons of unsold Herbalife shakes in his or her basement, and has had trouble -- but for one grim exception.Continue reading: If you’d rather see the apocalypse happen than agree with Bill Ackman…