Herbalife (HLF) Rises on Failure of “Death Blow” Attempt by Antagonist

Shares of Herbalife Ltd. (HLF) rose sharply on Tuesday on a strong day on Wall Street overall. Herbalife's stock was up 25.45%, up $13.75 per share to close at $67.77, on volume of 27,948,910 shares - roughly 20 times normal volume for the stock. The stellar performance of the stock was in reaction to investors shaking off statements by billionaire investor William Ackman in an attempt to discredit and bring down the company through an online video presentation.

It was also a recovery from an 11% drop in Herbalife's share price on Monday in anticipation of Ackman's video.

Founded in 1980, and headquartered in George Town in the Cayman Islands, Herbalife Ltd.is a global nutrition company offering a range of weigh management products, nutritional supplements and personal care products intended to support a healthy lifestyle. Its products focus on weight management, targeted nutrition, energy, sports and fitness, and outer nutrition that capitalizes on the mega trends of obesity and anti-aging. With 7,400 employees, the company had a net income of $527.53 million on revenues of $4.83 billion in 2013. The company's stock trades on the New York Stock Exchange.

Wall Street shook off yet another attempt by Pershing Square Capital Management head and billionaire William Ackman to discredit the company through a live stream internet presentation in which Ackman asserted that Herbalife is pyramid scheme with phantom and fictitious customers. The presentation was given today and viewed by 10,000 people. After the stock price fell 11% on Monday in anticipation of the presentation, it came roaring back today as investors decided that it has no substance.

In December of 2012, Ackman made a $1 billion bet against Herbalife, with the equivalent of 25.7 million shares in put options that expire on January 17, 2015. Since taking the position against the company, Ackman has spent over $50 million investigating Herbalife in an attempt to expose the company as a fraud. After his internet presentation on Tuesday, it was apparent that he had failed to prove his point as investors brushed off his allegations and loaded up on the stock, giving Herbalife its best day on Wall Street ever.

Several well known investors have taken counter bets against Ackman, holding large positions of Herbalife stock, including George Soros and Carl Icahn. Icahn holds a 17% stake in Herbalife, and saw his position increase by $234 million on Tuesday as Ackman's claims unraveled and the stock price surged.

In his online presentation, Ackman claimed that his investigation into Herbalife revealed that the company is targeting Latinos and other low income groups looking for a viable business opportunity, when in fact it is an attempt by Herbalife to acquire and take advantage of a source of free labor. He also claimed that the company has "phantom or fictitious customers", and that trainees hoping to become club distributors are being defrauded.

In its press release issued on Tuesday to counter Ackman's claims against the company, Herbalife disclosed that "According to a recent study commissioned by the company, 87.5% of nutrition club operators feel good about the money they earn and 92% want to continue with their clubâ?¦We are confident that the facts are on our side and look forward to fighting back."

Other News About Herbalife Ltd.
Herbalife Issues Release Highlighting 'Positive Impact of Nutrition Clubs on Members, Consumers, Communities'
Herbalife members and customers share their experiences at nutrition clubs.
Retiree With Sixth-Grade Education Says Herbalife Shakes Cost Him $30,000
A retiree says a Herbalife distributor tricked him into squandering $30,000 in savings.

Other Stocks in the News
Amazon cut to neutral from buy at Citigroup
Amazon.com was slashed to neutral from buy on Tuesday by analysts.
GoPro receives overweight rating from J.P. Morgan
J.P. Morgan initiated an overweight rating on shares of wearable camera maker GoPro.

Published on Jul 23, 2014
By Kevin Mercadante

Copyrighted 2020. Content published with author's permission.

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