Market Overview

Herbalife, Nu Skin Drop After Post Says FTC Readying Probe

Shares of multi-level marketers Herbalife (NYSE: HLF) and Nu Skin (NYSE: NUS) dropped Monday morning after The New York Post reported that the Federal Trade Commission is investigating Herbalife.

According to documents obtained by The Post, there is a “pending law enforcement action” in regards to Herbalife. Shares of Herbalife fell over 11 percent in the pre-market on Monday, and Nu Skin shares were down over 4 percent. Nu Skin has become a sympathy play to Herbalife, as it operates a similar business.

Hedge fund manager Bill Ackman alleged that Herbalife was a pyramid scheme in a presentation he gave back in December. Ackman stated that he expects shares to fall to $0.

Other hedge fund managers have taken the opposite side of the trade, most notably Dan Loeb, who took an 8.2% stake in the company. In a letter to his investors, Loeb called Ackman's case against Herbalife “preposterous.”

The FTC took action against another multi-level marketing company, Fortune Hi-Tech Marketing, just last week.

Shares of Herbalife traded near $31 on Monday.

Posted-In: News Legal Pre-Market Outlook Intraday Update Movers Media Trading Ideas Best of Benzinga

 

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