Herbalife Ltd. (NYSE:HLF) shares dropped more than 10% as trading drew to a close on Friday afternoon. According to a report by Dan McCrum and Kara Scannell in the Financial Times the company is the target of a criminal probe led by the US Department of Justice and the Federal Bureau of Investigation.
According to Dan McCrum and Kara Scannell who wrote the report for the Financial Times, the investigation is centered in the US attorney’s office in Manhattan. The Financial Times reinforced that the company may never see any charges as a result of the investigation. The investigating bodies refused to comment on the story and the exact nature of the investigation remained unknown at time of writing.
Herbalife has no knowledge of criminal investigation
Herbaife Ltd. (NYSE:HLF) says that it has no knowledge of a criminal investigation into its activities. The company’s critics have argued that its business model resembles a pyramid scheme more than it does an actual business. The firm has constantly refuted those accusations and the market has driven its value up based on the success of those refutations and the company’s solid earnings numbers.
The Federal Trade Commission is also investigating Herbalife Ltd. (NYSE:HLF), and the company’s shares have already lost a hefty amount of value on the back of that process. there are entrenched longs involved in the company, including Carl Ichan who has sought for members on the company’s board and more control over its actions. Monday’s trading should show interesting reactions from those investors.
Herbalife Ltd. (NYSE:HLF) has not, according to the Financial Times, been accused of any wrongdoing. Whether or not the investigation results in anything damaging remains to be seen, but most investors seem unwilling to take the risk. The massive loss in value at the nutritional supplement seller on Friday afternoon was remarkable, and investors will watch its form on Monday with bated breath.
Shares in Herbalife crash
Many Herbalife Ltd. (NYSE:HLF) investors will regret taking Friday afternoon off. The nutritional company’s shares crashed after the Financial Times report on the DOJ investigation emerged. At time of writing the company had lost more than 14% of its value. The firm’s shares began to crash at 15:00 EST.
Shares in the company have lost more than a third of their value so far in 2014 as pressure on the firm mounts. Hedge fund manager Bill Ackman has been running a highly publicized short campaign against the company. The short appears to be paying off this afternoon, but the company’s shares are still well above where they were in December 2012, when the manager publicly initiated his bet against the company.
Find Herbalife’s statement on the issue below:
LOS ANGELES–(BUSINESS WIRE)–
Herbalife (HLF) today issued the following statement in response to media reports and rumors in the marketplace:
We have no knowledge of any ongoing investigation by the DOJ or the FBI, and we have not received any formal nor informal request for information from either agency. We take our public disclosure obligations very seriously. Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments.
About Herbalife Ltd.
Herbalife Ltd. (HLF) is a global nutrition company that sells weight-management, nutrition and personal care products intended to support a healthy lifestyle. Herbalife products are sold in more than 90 countries to and through a network of independent members. The Company supports the Herbalife Family Foundation and its Casa Herbalife program to help bring good nutrition to children. Herbalife’s website contains a significant amount of financial and other information about the company at http://ir.Herbalife.com. The company encourages investors to visit its website from time to time, as information is updated and new information is posted.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, among others, the following:
- any collateral impact resulting from the ongoing worldwide financial environment, including the availability of liquidity to us, our customers and our suppliers or the willingness of our customers to purchase products in a difficult economic environment;
- our relationship with, and our ability to influence the actions of, our Members;
- improper action by our employees or Members in violation of applicable law;
- adverse publicity associated with our products or network marketing organization, including our ability to comfort the marketplace and regulators regarding our compliance with applicable laws;
- the outcome of inquiries from regulatory authorities;
- changing consumer preferences and demands;
- our reliance upon, or the loss or departure of any member of, our senior management team which could negatively impact our Member relations and operating results;
- the competitive nature of our business;
- regulatory matters governing our products, including potential governmental or regulatory actions concerning the safety or efficacy of our products and network marketing program, including the direct selling market in which we operate;
- legal challenges to our network marketing program;
- risks associated with operating internationally and the effect of economic factors, including foreign exchange, inflation, disruptions or conflicts with our third party importers, pricing and currency devaluation risks, especially in countries such as Venezuela;
- uncertainties relating to the application of transfer pricing, duties, value added taxes, and other tax regulations, and changes thereto;
- uncertainties relating to interpretation and enforcement of legislation in China governing direct selling;
- uncertainties relating to the interpretation, enforcement or amendment of legislation in India governing direct selling;
- our inability to obtain the necessary licenses to expand our direct selling business in China;
- adverse changes in the Chinese economy, Chinese legal system or Chinese governmental policies;
- our dependence on increased penetration of existing markets;
- contractual limitations on our ability to expand our business;
- our reliance on our information technology infrastructure and outside manufacturers;
- the sufficiency of trademarks and other intellectual property rights;
- product concentration;
- changes in tax laws, treaties or regulations, or their interpretation;
- taxation relating to our Members;
- product liability claims;
- whether we will purchase any of our shares in the open markets or otherwise; and
- share price volatility related to, among other things, speculative trading and certain traders shorting our common shares.
We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.
SVP, Worldwide Corp. Communications
VP, Investor Relations