Herbalife Shares Regain Losses After FTC Clarifies Legal Probe
Shares of Herbalife (NYSE: HLF) staged a mid-session comeback Monday after the Federal Trade Commission (FTC) corrected a statement that erroneously suggested that Herbalife was the subject of a law-enforcement probe.
Shares of Herbalife opened Monday's session down over 10 percent, trading around $31 per share. By the end of the session, shares regained their losses and were back near $35.
In addition to the FTC correction, Herbalife itself issued a press release demanding that The New York Post issue a correction. The Post initially reported early Monday morning, based on statements given to it by the FTC, that Herbalife was the subject of a law enforcement probe.
Bill Ackman, founder of the hedge fund Pershing Square, is currently short roughly 20 million shares of the multi-level marketer. He laid out his short thesis at a presentation back in December, calling the company a “well-managed pyramid scheme.”
If Ackman's accusations are correct, then the FTC might consider taking action against Herbalife. The FTC recently went after another MLM, Fortune Hi-Tech Marketing, shutting the company down.
Still, other hedge fund managers, notably Third Point's Dan Loeb, have taken the other side of the trade. Loeb labeled the notion that Herbalife would be shut down by regulators “absurd.”
Shares of Herbalife traded near $35.40 on Tuesday, down about 0.40 percent.
© 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.