Loeb Takes Stake in HerbalifeWednesday, January 9, 2013
Herbalife Ltd. got a boost Wednesday on word that a respected trader had taken a stake in the company. But that news was tempered by a report that securities regulators had opened an inquiry into the company.
Daniel Loeb of New York hedge fund Third Point LLC reported in a Wednesday Securities and Exchange Commission filing that he had taken an 8.2 percent passive stake in the Los Angeles nutritional-supplement maker.
Herbalife sells its products using a multilevel marketing business model that throughout its history has left the company vulnerable to charges of operating a pyramid scheme. Last month, its shares fell 38 percent over several days after hedge fund manager William Ackman of Pershing Square Capital Management LP disclosed that he had taken a short position because he believed Herbalife misrepresented sales figures and was operating as a pyramid scheme.
The stock has since regained much of its value as some analysts jumped to the company’s defense and bargain hunters took advantage of the depressed share price.
The Wall Street Journal on Wednesday quoted a source saying that the SEC’s New York office had opened an inquiry into Herbalife as a result of the furor.
Herbalife on Thursday will hold an analyst and investor meeting as part of its campaign to refute Ackman’s allegations. The event will be online beginning at 6 a.m. PST at ir.herbalife.com.
Shares on Wednesday closed up $1.60, or 4 percent, to $39.95 on the New York Stock Exchange, after earlier gaining as much as 9 percent.