This week was looking like one that Bill Ackman would want to forget. It began with a New York Times article that read like something Herbalife CEO Michael Johnson and Carl Icahn might have collaborated on. It continued with yesterday’s $300 million Fannie Mae/Freddie Mac hiccup. Even Ackman’s latest presentation on what he very sincerely hopes is a pyramid scheme, accusing Herbalife of breaking Chinese laws, failed to either lift his spirit or dent its stock price. But this has definitely accomplished the latter, and almost certainly the former.
Herbalife Ltd., the nutrition company that hedge fund manager Bill Ackman has accused of being a pyramid scheme, disclosed that the U.S. Federal Trade Commission has started a civil probe into its practices.
Herbalife fell 7.5 percent to $60.46 at 3:19 p.m. in New York and earlier slid as much as 17 percent for the biggest intraday drop since Dec. 21, 2012. Through yesterday, the shares had gained 54 percent since Ackman first made his accusations.
The probe marks an achievement for Ackman, who in 2012 made a $1 billion bet against Herbalife’s shares and started working to persuade regulators to shut the company down, saying it misleads distributors, misrepresents sales figures and sells a commodity product at inflated prices. The company has repeatedly denied Ackman’s allegations and won allies including billionaire Carl Icahn.
“Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace,” the Cayman Islands-based company said today in a statement. “We are confident that Herbalife is in compliance with all applicable laws and regulations."
Herbalife Discloses Civil Investigation by FTC [Bloomberg]