I'm reading a fantastic book that recaps the epic battle between Herbalife and Bill Ackman. The book is titled, "When the Wolves Bite: Two Billionaires, One Company and an Epic Wall Street Battle" (link here). In the book, author Scott Wapner covers a lot of history that includes the build-up that led to Ackman's short investment. I was fortunate to have a front-row seat to some of the early events due to my friendship with one of the hedge fund managers Bob Chapman. As I'm reading the history, and reviewing the timing of events, I cannot help but think that Herbalife, holding hands with the DSA, injured itself. How, you might ask? David Einhorn is a hedge fund manager at Greenlight Capital. In early May of 2012, Einhorn got on an earnings call and asked a few basic questions. The market went haywire, assuming (correctly, as it turns out) that he was short $HLF. $HLF dropped over 20% in a single day. In Wapner's book When the Wolves Bite, he makes it clear that it was Einhorn's call that prompted Ackman to transition from research to action. In May of 2012, Ackman started shorting Herbalife. So what got Einhorn interested in Herbalife? I'm sure it was a number of things that got him interested. He, like Ackman, was pitched the short by an analyst (Christine Richards), who provided a lot of research about Herbalife. It's odd, though, that around April of 2012, I fielded a lot of random calls from people about Herbalife's response to my anti-pyramid bill in Tennessee. To refresh the reader's memory, I tried to pass an Anti-Pyramid bill in 2009 in Tennessee that simply required distributors to have SOME retail sales before they were eligible for commissions. As expected, the DSA showed up to kill it. But...as I've written about in the past, they did not show up alone. They brought someone from...Herbalife. Einhorn is no idiot. People like him look for subtle clues that give him an edge. He and others like him must have thought, "Why would Herbalife be so concerned about a bill that requires them to do something they were already supposed to be doing i.e. retailing?" The moral of the story: It's sometimes best to let the lobbyists look like idiots alone. I think Herbalife's presence at that very (seemingly) innocuous meeting in Tennessee back in 2009 might have been a factor that gave Einhorn confidence in his short 3 years later. Unlike Ackman, Einhorn made money with the trade. He got in and out of his short position without making a sound. He must have figured that while Herbalife could be wounded, they could not be killed. Ackman placed a big bet on the latter and suffered serious consequences. Plus, to Herbalife's credit, they have shown themselves to be a legitimate network marketing company, despite Ackman's assertions. They're currently generating significant retail activity, which has led Ackman to cover his short and move on to other mistakes.