Herbalife Soars As Pyramid Scheme Lawsuit Is Dismissed

A U.S. District Judge said that a group of shareholders led by pension funds did not show that questions raised about Herbalife Ltd.'s HLF business practices concluded that the company fraudulently inflated its stock price.

Herbalife shares were up more than 11 percent Wednesday morning. Shares recently traded at $37.84, up 98. percent.

Reuters reported U.S. District Judge Dale Fischer in Los Angeles said on Monday that shareholders led by two pension funds did not show that questions raised about Herbalife's business by hedge fund manager Bill Ackman and various investigators showed that the company had fraudulently inflated its stock price.

"Just as black swans may exist, there may theoretically be some form of opinion that is factual or revelatory in nature such that it qualifies as a corrective disclosure," Fischer wrote in a report. "Such an opinion would need to reveal to the market something previously hidden or actively concealed. That is not this case."

Herbalife has long denied it was running a pyramid scheme, but critics including short sellers argued that Herbalife's distributors see little profit from selling its products, rather they make money on recruiting a network of distributors to sell products.