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Herbalife’s stock soars amid hopes that FTC probe may finally be resolved
By Tomi Kilgore
Published: Feb 26, 2016 10:52 a.m. ET
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Shares on track for their 2nd-biggest percentage gain in another blow for Bill Ackman
Bloomberg
Herbalife Ltd.’s stock rocketed higher in active trade Friday, after the company fanned hopes that a drawn-out probe by the Federal Trade Commission may be nearing an end.
The dietary and nutritional supplements company disclosed in a regulatory filing late Thursday: “The company is currently in discussions with the FTC regarding a potential resolution of these matters.”
Any resolution into the company’s HLF, +20.52% methods of advertising, marketing, or sale of business opportunities, which was disclosed in March 2014, may come as a relief to shareholders, as it would give speculators betting against the stock one less thing to harp on. Billionaire hedge-fund manager Bill Ackman has gone to elaborate lengths, including publicly releasing a mini documentary, to push his belief that the company was operating a pyramid scheme.
The stock soared 23% in morning trade, putting it on course for its second-biggest one-day percentage gain since the company went public in December 2004. Volume in the first hour of the regular session was about 3.2 million shares, or nearly double the full-day average over the past 30 days, according to FactSet.
FactSet
Investors didn’t seem to care that the company stated it couldn’t predict the timing of any resolution, or if it would have a “material adverse impact” on its operations.
“The possible range of outcomes include the filing by the FTC of a contested civil complaint, further discussions leading to a settlement which could include a monetary payment and other relief or the closure of these matters without action,” the company stated in the filing. “At the present time, the company is unable to estimate a range of potential loss, if any, relating to these matters.
In an ironic twist, the resolution may finally vindicate Ackman, who has been pushing regulators to investigate the company, but he could still see any profits he made on his bearish bets dwindle as that resolution removes an overhang.
Bloomberg
William "Bill" Ackman, founder and chief executive officer of Pershing Square Capital Management LPThe shares have now run up over 30% since they closed at a nine-month low of $43.42 on Feb. 8, and have nearly doubled from their multiyear closing low of $29.70 on Jan. 20, 2015. They are now just 7% away from where they closed on March 12, 2014, when Herbalife said it received a Civil Investigative Demand from the FTC.
The company also reported late Thursday fourth-quarter results that beat profit and sales expectations, but cut its profit outlook for 2016, citing unfavorable currency market developments.
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