Highly regarded short seller Jim Chanos told Bloomberg’s Trish Regan why he wouldn’t be an investor in Herbalife (HLF). Chanos got to the point in one minute as opposed to the hundreds of pages used by Bill Ackman in his infamous Powerpoint presentation in December.
Saying “we don’t have a dog in that hunt right now,” Chanos told Regan he was a skeptic of the multi-level marketing business model. “Any business that’s dependent ultimately on pulling the wool over your customers, whether it’s the distributors who take on more product than they can sell, or the customers who are being sold product at two to three times what it’s available for down the street, I think is a long-term unstable business model that I wouldn’t want to invest in.”
Chanos cautioned that shorting HLF was “another issue,” but being in the business of fooling your customers and sales force is not the basis for a sustainable long-term business.
When Regan questioned the legality of HLF’s business, Chanos said he didn’t believe it was unlawful to overcharge customers as long as there was proper disclosure.
Back in September 2011, Chanos was very negative on China’s prospects [link].