A day after Herbalife Ltd. (NYSE:HLF) and Bill Ackman traded barbs yet again, the Federal Trade Commission announces that it is launching a formal inquiry into Herbalife. Trading on the company’s stock was halted at 1:18 p.m. Eastern so that the news could be announced. Officials also halted trading on Herbalife competitor Nu Skin Enterprises, Inc. (NYSE:NUS) because of the revelation about Herbalife.
Herbalife probe officially begins
You may remember that U.S. Sen. Ed Markey sent a letter to the FTC and also the Securities and Exchange Commission recently urging that they investigate Herbalife Ltd. (NYSE:HLF). The SEC was very tight-lipped on the matter, although the FTC said they were considering his request. Now the FTC has filed a civil investigative demand against Herbalife.
Herbalife Ltd. (NYSE:HLF) issued this statement to ValueWalk in response to the announcement about the inquiry:
“Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace, and will cooperate fully with the FTC. We are confident that Herbalife is in compliance with all applicable laws and regulations. Herbalife is a financially strong and successful company, having created meaningful value for shareholders, significant opportunities for distributors and positively impacted the lives and health of its consumers for over 34 years.”
The company said it doesn’t intend to make any more comments on the investigation “unless and until there are material developments.”
Shares of Herbalife Ltd. (NYSE:HLF) are indicated to reopen down about 10% after trading on them was halted. Shares of Nu Skin Enterprises, Inc. (NYSE:NUS) were halted about 11 minutes after Herbalife shares were halted because of extreme volatility, which officials believe is due to the news about the FTC’s investigation into Herbalife.
Today’s announcement from the FTC comes a day after Bill Ackman gave a presentation explaining why he believes Herbalife Ltd. (NYSE:HLF) is operating in violation of Chinese regulations governing direct sales. The nutritional supplements company maintains that it is not violating law and is not a pyramid scheme, as Ackman has claimed for over a year.
