Levine on Wall Street: So Long Sons and Daughters

The central question of Herbalife comes down to, how do distributors *feel* as they're drinking their own diet shakes? Ripped off, or excited to be losing weight?

How to tell if Herbalife's internal consumption is bad.

If you're into the Herbalife is-it-a-pyramid-scheme saga, here is a good post from clear-eyed Herbalife bull John Hempton. It is about how to determine whether Herbalife's internal consumption is an indicator that it is a fraudulent pyramid scheme ("internal consumption" is mostly failed distributors literally eating their losses) or rather a popular buying club ("internal consumption" is mostly enthusiastic customers who sign up as distributors to get a bulk discount). But it is also about how investors and the press should do research on controversial companies; it involves actually going out and doing due diligence, in this case at Herbalife clubs.

Bill Ackman has almost broken even on Herbalife.

The meta-rational way to find out of Herbalife is a fraudulent pyramid scheme is to watch its stock price, though this assumes that the people setting the stock price are actually doing the work. Anyway Herbalife is almost back to where it was when Bill Ackman started shorting it. This cannot exactly be a cause for celebration at Pershing Square, which has a highly publicized price target of zero.

JPMorgan's top China investment banker is leaving .

Two theories on why Fang Fang is leaving include "He has said he wants to spend more time with family and pursue new opportunities," and "Mr. Fang, a Chinese citizen, has emerged as a key figure for U.S. investigators as they examine whether J.P. Morgan Chase or any of its employees violated the Foreign Corrupt Practices Act." Because he did things like sending an email saying "You all know I have always been a big believer of the Sons and Daughters program — it almost has a linear relationship" with winning business.

French bankers are very reasonable people .

"If you look at other big European banks that are less profitable than us, their CEOs are being paid at least €8m," says BNP Paribas chief executive Jean-Laurent Bonnafé. "Personally I will get €3m. French banks in that respect and their top executives are very reasonable people. That is the way it is. It is good enough."

It's too hard to start a business in France .

So 29-year-old Guillaume Santacruz headed to London to start Zipcube, "a sort of Airbnb for renting office space online," and you could imagine very reasonable people saying well, yeah, if the cost of our social safety net is that no one will invent smartphone apps for sharing smartphone-app-building space, then so be it.

Hong Kong is fine with losing the Alibaba listing to New York.

Why does Hong Kong ban dual-class share structures while NYSE and Nasdaq are fine with them? Hong Kong lawyer Jeffrey Mak has a theory:

"The whole U.S. system is more litigious, meaning that if there's anything wrong, then investors tend to go to lawyers to sue," Mak said by phone. "In Hong Kong, there could be an inertia from investors to sue a company in such situations. The regulators want therefore to take a more proactive role in Hong Kong to protect the interest of shareholders."

And regulators aren't going to change their mind just for Alibaba. This is a rather cheery view of the U.S. shareholder-litigation system, but I suppose it's true. A lot of the shareholder lawsuits you actually see are lazy stock-drop cases, but that's in part because the case law really does deter particularly egregious abuses of minority shareholders by controlling shareholders.

Did the JOBS Act make it cheaper to go public ?

Not particularly, from an underwriter fee perspective; the going rate is still 7 percent. It is not clear why your model would be "making it easier for small companies to go public with less disclosure will lower underwriting fees"; one possibility would be that those companies would be riskier and more labor-intensive to take public. Another possibility is that the fee is 7 percent because the fee is 7 percent, and changes in the mix of IPO candidates or the IPO rules are unrelated to the fee being 7 percent.

It's Name of the Year time.

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    (Matt Levine writes about Wall Street and the financial world for Bloomberg View.)

    To contact the author on this story:
    Matthew S Levine at mlevine51@bloomberg.net

    To contact the editor on this story:
    Toby Harshaw at tharshaw@bloomberg.net

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