Explaining Southern California's economy

Why are Dan Loeb and Bill Ackman fighting over the future of Herbalife?

Hedge fund manager Bill Ackerman says Herbalife is a pyramid scheme and has bet $1 billion on its fall. Hedge fund manager Dan Loeb begs to differ and has bet $350 million that the stock will rise in value.

Herbalife has a headquarters in downtown Los Angeles, is incorporated in the Cayman Islands, is run by CEO Michel Johnson, a former Disney executive, and has been in business for more than 30 years. It did $3.5 billion — yes, that's billion — in net sales in 2011, has 6,000 staff employees and three million — that's million — independent distributors worldwide.

And since late last year, it's been under assault by Bill Ackman, who runs Pershing Square Capital Management, a New York hedge fund. Just before Christmas 2012, Ackman conducted a three-hour presentation is which he worked through 343 PowerPoint slides (see it here and add to Business Insider's over three million page views for the post) and laid out the case that Herbalife is a pyramid scheme. Ackman has set a target price for the company's price of zero. 

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Why LA should be glad Steven Cohen didn't buy the Dodgers

Hedge Fund Manager Charged In Major Insider Trading Case Appears In Court

Spencer Platt/Getty Images

Former hedge fund portfolio manager Mathew Martoma exits a New York federal court after being charged in one of the biggest insider trading cases in history. He worked for CR Intrinsic Investors LLC, a firm that was associated with Steven Cohen's SAC Capital Advisors.

Speculation about the size of a potential deal for AEG — estimates range from $8-$10 billion — has quickly made Angelenos forget about the $2-billion-plus price that Guggenheim Baseball Management and Magic Johnson paid for the L.A. Dodgers earlier this year. Angelenos may have forgotten something else: Until Guggenheim Partners swept in from Chicago to add another half billion to the deal, the price for team was hovering around $1.6 billion and the leading bidder was Steven Cohen.

As I explained at the time, Cohen — one of Forbes' wealthiest Americans, with a net worth north of $8 billion — was one of the few bidders for the Dodgers who could basically write a check for the team. In fact, that seemed the likely outcome, until Mark Walter and Guggenheim emerged from the background. Cohen had even paired up with local L.A. billionaire Patrick Soon-Shiong, the richest guy in town. It wasn't enough in the end to trump Guggenheim's bid.

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Why Google has stopped trading on the Nasdaq stock exchange

KIMIHIRO HOSHINO/AFP/GettyImages

A Google+ logo is seen at Google's annual developer conference, Google I/O, at Moscone Center in San Francisco. The search giant ran into some trouble today on Wall Street.

Two bad things happened to Internet search giant Google Thursday: the company missed Wall Street earnings expectations for the third quarter by a country mile; and its earnings release hit the wires in the middle of the trading day, rather than after hours.

The stock has stopped trading on the Nasdqaq exchange while everybody gets this all sorted out. In an amusing turn, a Twitter account has already been created for @PendingLarry, a reference to a line from Google's premature release to the SEC, "PENDING LARRY QUOTE," with the "Larry" being Google CEO Larry Page.

Former Securities and Exchange Commission Chairman Harvey Pitt was on CNBC Thursday saying that the screwup with Google's release — which could equally be blamed on R.R. Donnelly, who handles the technical aspects of Google's SEC reporting — means that folks who just lost a ton of money ($19 billion market capitalization basically vanished in a matter of minutes) will lawyer up and sue everybody in sight.

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LegalZoom IPO: Be afraid, lawyers! Be very afraid!

Legal-Zoom

LegalZoom just filed for an IPO, hoping to raise $120 million.

Glendale's own LegalZoom filed for an IPO on Friday. Okay, so it's not quite Facebookian in value. Whereas Zuck & Co. are aiming to raise $5 or $10 billion, LegalZoom, which has been around since 1999 (making it about 3000 years old, in Internet years) wants to bring in only $120 million. But don't be fooled by that seemingly modest valuation for a company that's been around since the halcyon days of Web 1.0. LegalZoom could be poised to partake in one of the most significant disruptions American business has ever seen.

The legal professional is being totally re-arranged by the economic downturn. Law firms have imploded. Law school grads — who used to be able to bank on fat salaries in exchange for 100-hour work weeks at big firms, if they attended top programs (and they needed the big bucks to pay off their hulking loans) — are struggling to find jobs. Law is no longer the often-boring but generally reliably lucrative escape hatch it once was for decades of career-confused liberal arts majors. 

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How the Facebook-Instagram deal shakes out

The home page for Facebook founder Mark

Karen Bleier/AFP/Getty Images

The home page for Facebook founder Mark Zuckerberg. Facebook today revealed details of its purchase of Instagram.

Facebook "reported" quarterly financials today, as part of the prelude to its IPO in May. Through a required filing with the SEC, we learned that it's costing a lot more to be Facebook, as profits dropped 12 percent, to $205 million from $233 million. We also learned how the Instagram deal is getting done. This is from the LATimes:

The regulatory filing also disclosed details of Facebook's agreement to buy Instagram. The company paid for the $1-billion deal with $300 million in cash and 23 million shares. Facebook placed a value of $30.89 apiece on its shares as of Jan. 31. Facebook said it would pay Instagram $200 million in cash if the government blocked the $1-billion deal.

So only 30 percent of the deal is in cash, which still isn't too bad for a company — Instagram — that didn't exist two years ago and has no revenues and no real business model (besides being sold to Facebook for $1 billion after it ate Facebook's lunch for a year in mobile photo uploading and sharing). 

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