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Herbalife Down After National Consumers League Asks for FTC Investigation

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Herbalife Down After National Consumers League Asks for FTC Investigation

Shares of Herbalife (NYSE: HLF) tumbled on Wednesday after the National Consumers League sent a letter to the Federal Trade Commission. The NCL asked the regulator to open an investigation into Herbalife.

In its letter, NCL specifically names Pershing Square and cites the hedge fund's “eighteen-month investigation.” The NCL states that it has met with Pershing Square, Herbalife and the Direct Selling Association, and believes that the FTC should digest Pershing's accusations on its own.

Pershing Square is currently short roughly one-fifth of Herbalife's outstanding shares. In a presentation given last December, Pershing Square's Bill Ackman accused Herbalife of running a pyramid scheme. According to Ackman, Herbalife's business violates U.S. law.

But other hedge fund managers have taken the other side of Ackman's trade, including Dan Loeb and, most notably, Carl Icahn. Activist investor Icahn currently owns more than 15% of Herbalife, and has been permitted by the company's management to acquire up to 25%.

Despite drawing firing from his peers, Ackman remains as resolute as ever in his beliefs on Herbalife. Following the release of NCL's letter, Pershing Square commented that it was “pleased that the NCL...has requested...an investigation of Herbalife.”

Meanwhile, Herbalife itself told the WSJ that “the NCL has permitted itself to be the mechanism by which Pershing Square continues its attack on Herbalife” and that “Pershing Square...should be investigated by appropriate authorities.”

Shares of Herbalife slid nearly 2% on Wednesday.

 

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