Why Short Sellers Want to Crash the Tupperware Party

Why Short Sellers Want to Crash the Tupperware Party - New York Times

When the Federal Trade Commission proposed new rules this spring for multilevel marketers —businesses best known for commercials that promise riches selling herbal supplements and beauty supplies — it drew howls of protest. Tupperware party-givers, diet pill vendors, and knife salesmen sent the agency more than 15,000 letters complaining that the proposed rules would undo a $30-billion-a-year industry.

Now the regulator has gained an unusual ally: short sellers.

These investors are betting that the stocks of multilevel marketing companies will decline when the new rules, which have received little public attention, go into effect.

“If companies have to tell recruits that the average income is only $1,400 instead of the $50,000 advertised on their Web site, or that the average salesman only lasts two months, a lot fewer people are going to sign up,” said Mimi Sokolowski, an analyst with Sidoti & Company who follows Tupperware Brands, Nu Skin Enterprises and other publicly traded multilevel marketing companies. She said that if the proposed rules pass without modification, recruitment in the United States could fall by as much as 40 percent.