The shares of Herbalife closed $31.33 per share, up by 3.54% today. One reason that the stock was likely up – is the disclosure of the UBS Group AG that it acquired a stake in the company.
Based on the 13G filing with the Securities and Exchange Commission (SEC), UBS Group AG, directly and in behalf of certain subsidiaries acquired 5,871,468 or 6.4% stake in Herbalife.
The filing showed that UBS Group AG acquired the shares of Herbalife in the ordinary course of business. The firm also indicated that the shares “were not acquired and are not held for the purpose of or with the effect of changing or influencing the control” of the company.
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Cannacord pessimistic on Herbalife’s near-term performance
Today, analysts at Canaccord Genuity reduced their price target for the shares of Herbalife from $60 to $50 per share due to its declining revenue growth and compressed valuation. The analysts mentioned that they are more pessimistic regarding the near-term performance of the stock.
In a note to investors, the analysts wrote, “Our F2015 revenue growth forecast is reduced much more significantly given the currency headwind. We have lowered our revenue forecast by 5% and our EPS estimate by 9% to reflect the weaker currencies. Our sales reduction is most pronounced in Mexico (-9%), followed by EMEA (-8%), C/S America (-7%) and Asia Pacific (-4%),” said analysts at the firm.
Take note that the current stock price of Herbalife is significantly lower than the price target of Canaccord Genuity. In fact, the shares of the company dropped 2.65% to $30.50 per share during the extended hours trading on Thursday.
Market is on its way to shutting down Herbalife
Bill Ackman, the hedge fund manager of Pershing Square Capital Management thinks the market will soon shutdown Herbalife during an interview with Wall Street Unfiltered.
“I think the market is on its way to shutting down the company. I think it would be an enormous embarrassment to the regulators if the company collapses before regulators have done their job.”
Ackman added that the transparency created around Herbalife makes it more difficult for the company to recruit distributors. The activist investor strongly believes that the company is a pyramid scheme. He previously estimated that approximately 2 million Herbalife distributors failed over the past 30 years.
“Pyrmid schemes are inherently unstable,” said Ackman.
See John Hempton for an interesting twist on this topic.