Mar 13, 2014, 4:31 PM EDT
Herbalife’s business model has always been a bit controversial. Late in 2012, billionaire investor Bill Ackman called their “multi-level marketing” model a pyramid scheme and proceeded to put his money where his mouth is. The Pershing Square hedge fund manager shorted the company’s stock with a $1 billion bet, contending the company was destined to go bust.
Yesterday was a big day for Ackman, with Herbalife stock closing down 7.4 percent after news the company is being investigated by the Federal Trade Commission. The term “pyramid scheme” is being thrown around.
Even if nothing comes of the investigation, this isn’t good news for Major League Soccer; or, more specifically, the LA Galaxy. The Cayman Islands-based company has been a long-time shirt sponsor of the four-time champions, with the partners’ latest 10-year, $44 million sponsorship deal only in its second year. But, as Bloomberg’s Kavitha Davidson explains, that sponsorship becomes a burden for both club and league if Herbalife’s perception goes in the tank:
This isn’t just any soccer club caught up in a potential fiscal fiasco – this is the face of the league. The Galaxy’s success has been a primary booster for the national and global MLS brand …
Herbalife is the official jersey sponsor of the Galaxy, who have several players on the list of the top-selling MLS jerseys. The partnership had only grown stronger in recent months, highlighted by the October launch of the “Be a Pro” Web series …
It would be a hard pill to swallow for both the Galaxy and MLS if these accusations ultimate prove to hold water.
That’s why the FTC’s involvement is so scary. Whereas Herbalife has always been surrounded by ifs, a federal investigation bolsters those hypotheticals.
Perhaps, as the company implies, the investigation could turn into a positive, allowing the brand to clear up any misconceptions about their model’s legality. Until then, though, both MLS and the Galaxy are stuck in the debate’s crossfire.
“Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace,” the Cayman Islands-based company said today in a statement. “We are confident that Herbalife is in compliance with all applicable laws and regulations.”
In the mean time, the league’s most recognizable franchise has a problem literally written across its chests. Should Herbalife go away, a brand as strong as the Galaxy’s would surely be able to replace it. In the interim, though, MLS and one of its marquee franchises will have to ride it out.
Mar 29, 2015, 11:27 PM EDT
Are Saints about to lose another young star to one of the Premier League’s “big five?” We’ll find out this summer.
Mar 29, 2015, 10:52 PM EDT
Kane will join England’s U-21 squad for this summer’s European Championship.
Mar 29, 2015, 9:18 PM EDT
No fun for 70 minutes, and then the final 20 happened. TFC’s criminally disallowed goal was the only difference in this one.
Mar 29, 2015, 8:48 PM EDT
There’s a real reason, other than “easy schedule,” for England’s improved performances since the World Cup.
Mar 29, 2015, 6:55 PM EDT
Harry Shipp. Harry Shipp. Harry Shipp.
Mar 29, 2015, 5:58 PM EDT
Sterling isn’t interested in negotiating a new deal until the summer — even if it’s for $270,000/week — and a few reassurances are made.
Mar 29, 2015, 4:45 PM EDT
Who’s on top of Groups D, F and I at the halfway point?
Mar 29, 2015, 2:55 PM EDT
Luis Suarez was candid as ever after Gerrard’s charity match, and he opened up the possibility of a Premier League return down the road.
Mar 29, 2015, 12:05 PM EDT
Thierry Henry showed off his sparkling passing skills at Steven Gerrard’s testimonial.
Mar 29, 2015, 10:43 AM EDT
The United States loses one of their goalscorers from Friday’s friendly, but now it’s a youngster’s turn to make a statement.
Mar 29, 2015, 10:14 AM EDT
A whopping turnaround, led by owner Katharina Liebherr, has taken place at St. Mary’s and the financial evidence is there.
Mar 29, 2015, 9:40 AM EDT
If Adnan Januzaj wants to make a return to the Belgium squad, he must focus on earning playing time at his club first.
Mar 29, 2015, 8:13 AM EDT
An agreement has reportedly been reached between the current American owner and a domestic ownership group.
Mar 29, 2015, 7:34 AM EDT
Gareth Bale knows what people are saying about his recent play at Real Madrid, but he’s not listening.
Mar 28, 2015, 11:30 PM EDT
Catch up on all the action from Week 4 of the MLS season.
Mar 28, 2015, 10:41 PM EDT
A disappointing result for FCD, given Seattle’s lack of Dempsey and Martins, but a great one considering their early red card.
Mar 28, 2015, 10:06 PM EDT
Three more points for Vancouver, who win it late on Robert Earnshaw’s Whitecaps debut. He scores for everyone.
Mar 28, 2015, 9:15 PM EDT
It was the late, late, late show at RFK Stadium, and despite being thoroughly outplayed, D.C. United go home with three points.
Mar 28, 2015, 9:04 PM EDT
Sporting KC get their first victory of the season, while NYCFC suffer their first defeat of the year — and history.
- MLS Snapshot: Real Salt Lake 2-1 Toronto FC 2
- EURO 2016 qualifying roundup: Germany back on track; Portugal beat Serbia, go top 0
- Report: Aston Villa owner Randy Lerner set to sell team to UK group 0
- MLS roundup: Whitecaps, D.C. United win late ones; FCD, Sounders in disappointing draw 1
- MLS Snapshot: FC Dallas 0-0 Seattle Sounders 0
- MLS Snapshot: Vancouver Whitecaps 2-1 Portland Timbers 2