Thread by @xuexishenghuo

Roses are red
Violets are blue
$USNA is a pyramid scheme
And $NUS is a scam, too

1/N $USNA has multiple red flags in its financials and operations yet it is trading at close to multi-year high valuation - investors have forgotten the potential cataclysmic risks this business is facing

2/N red flag #1: why did the company change its definition of "associates" and "preferred customers" in Mainland China at the end of 2017 without explanation?

3/N red flag #2: why did the company stop reporting separate "associates" and "preferred customers" numbers in its most recent 10-Q?

4/N red flag #3: $USNA pays out 44% of revenue as associates incentives, the highest among its public peers ( $HLF $NUS). The company also has the highest % of sales coming from Mainland China (>50%).

5/N However, Chinese regulations would limit sales incentives paid to associates to 30% of sales. Simple math would suggest $USNA is either violating Chinese laws or paying >60% of sales as incentives to associates outside of China -making sales outside of China unsustainable

6/N there are on the ground evidence that $USNA is selling products that are not approved by the Chinese regulators for direct selling

7/N red flag #5: $USNA changed revenue recognition policy in 2018 to recognize revenue from products that are shipped but not yet delivered. The SEC is not thrilled about that

8/N red flag #6: there have been high profile cases that $USNA were fined multi-million dollars by various Chinese regulators

9/N red flag #7: there have been numerous executive turnovers at $USNA Chinese operation. most recently its head of Chinese ops resigned by sending an email to the company after 8 months on the job

10/N red flag #8: given that the Chinese direct selling law requires cash to be deposited with regulators as a guarantee against potential violations, $USNA balance sheet cash is very likely not readily accessible

11/N red flag #9: insiders have been dumping shares as soon as those are vested. Founder also made a very well timed large sell the day before the company reported disappointing results

12/N to be continued...