U.S. Attorney and FBI Launch Probe into Herbalife (HLF) Stock Manipulation

Shares of Herbalife Ltd. (HLF) were trading up +1.75 or +5.26 percent to $35.00 per share in this morning's premarket. Herbalife stock is up after news of an investigation into possible manipulation of the stock by fund manager Bill Ackman and people in his employ. Herbalife stock closed at $33.25 per share, up +0.15 or +0.45 percent in Thursday's regular trading session.

Los Angeles, California based Herbalife Ltd was founded in 1980 and is a multi-level marketing company selling skin care and weight loss products in 87 countries through a network of 2.7 million independent agents.
The company's product line includes energy and fitness supplements, protein snacks and shakes and personal skin care products.

Herbalife has been the target of an FTC investigation into its marketing practices and the company's stock has lost approximately half of its value as a consequence. Bill Ackman, head of Pershing Square Capital Management LP has campaigned fervently against the company, taking a huge short position in the company's stock and accusing Herbalife of misrepresenting sales and selling its products at inflated prices.

According to reports late yesterday, agents from the FBI's New York field office and prosecutors from the Manhattan U.S. Attorney's office have been conducting interviews and requesting documents relating to their investigation. The two law enforcement agencies are trying to determine whether people, some of them hired by Bill Ackman, have been making false statements about Herbalife's business model in an effort to incite an investigation and negatively affect the company's stock price.

The ongoing investigation, which has been focused on Herbalife's marketing practices, has branched out to include investigating allegations and public statements conveyed to regulators by activists and consultants that have actively lobbied against Herbalife and whether those people have any connection or collaborated with Pershing Square Capital. Both the FBI and the Manhattan office of the U.S. Attorney have declined to comment on the matter.

According to Alan Hoffman, a spokesperson for Herbalife, "Ackman has a $1 billion bet against Herbalife and a direct financial interest in hurting our company, for more than two years, he has spent over $75 million orchestrating a false and fabricated attack against Herbalife, all in an effort to enrich himself."

Pershing Square has accused Herbalife of being a pyramid scheme, which prompted the investigation. In an emailed statement, Pershing Square announced that over 1,000 U.S. victims had come forward and that, "We are proud of our work over the past two years exposing the pervasive victimization by Herbalife of millions of people and would welcome any scrutiny of those efforts. We have been completely transparent about our position and our research, and we have acted lawfully in every respect."

Herbalife stock has been pummeled since the beginning of the investigation, trading from a high of $69.69 down to below $30 per share. News of the investigation taking a new tack to include possible manipulation by Ackman is good news for Herbalife shareholders. Ackman and Pershing Square have a lot to lose considering that the hedge fund's short position in the stock exceeds $1 billion.

Other News About HLF
Bill Ackman Not Backing Down On Herbalife

Ackman claims statements against the company are true and that Herbalife is "intentionally deceiving people".

GUINNESS WORLD RECORDS® Confirms That Herbalife Sets New Record for Most Participants in a High Intensity Interval Training Workout in 24 Hours

Event culminates with 4,000 people working out in downtown LA.

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Published on Mar 13, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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