Herbalife Ltd. (HLF) In A Vacuum of Information: Duane Stanford

Herbalife Ltd. (NYSE:HLF)’s up by about 7% during the day and trades at around $43.1, after a long slide that started at the end of July. The company lost about 35% of its value in the course of the last two months. Bloomberg’s Duane Stanford examined the stock’s performance so far, but he said that little can be inferred as everybody is awaiting any news from the Federal Trade Commission (FTC), which is currently examining the possibility of Herbalife Ltd. (NYSE:HLF) being a pyramid scheme.

Bill Ackman placed a $1 billion bet that Herbalife Ltd. (NYSE:HLF) is a pyramid scheme. His Pershing Square Capital Management hedge fund devoted about one year in studying the company and its deeds. Since then the billionaire lost about half of the initial amount and only recently the FTC decided to take a closer look at the wellness company, and since then everybody succumbed to silence.

“One of the things we have right now is a vacuum of information. Ackman hasn’t made a presentation in a while. Meanwhile, the FTC is still investigating and that’s the big question: what are they going to do,” stated Duane Stanford.

Herbalife Ltd. (NYSE:HLF)’s products aren’t well-known and seem to be far from household names. Nevertheless, the company enjoys investments from renewed entities like Carl Icahn, Soros Fund Management LLC and William Stiritz. The worst part is that there is scarce information on the subject matter and its proceedings.

“It’s really unclear how long it could be before the FTC either gives a signal, if they give a signal at all as to what to do, or whether they come out and say: Herbalife is indeed a pyramid scheme as Bill Ackman has said,” added Mr.  Stanford.

The simplest way to detect such a pyramid scheme is by tracking sales. If the volumes going to people or companies outside the scope of Herbalife Ltd. (NYSE:HLF) are not sufficient to justify the declared profitability, the company will inevitably face charges from FTC.

Disclosure: none
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