3. Herbalife -- Yet Again
We swear to you, Dumbest fans. We were all ready to take a breather from the insanity surrounding the beleaguered supplement seller. Seriously, if anybody needs a respite from the trio of hedge fund honchos -- Carl Icahn, Bill Ackman and Dan Loeb -- scrumming over this silly stock it most certainly is us.
But then the New York Post jumped into the fray Monday with a report saying Herbalife is the target of a law enforcement investigation and all hell broke loose.Check out this comical chain of events. The Federal Trade Commission, responding to a Freedom of Information Act filing by the New York Post, released documents containing 192 assorted complaints against Herbalife that it received over the past seven years. The Post's story immediately sent the stock down 12% to less than $31. Herbalife, which must have a bad PR SWAT team standing by 24/7, immediately responded by demanding a correction from the Post, claiming "we are unaware of any other regulatory interest and/or investigation." That set off the Federal Trade Commission which backtracked on its verbiage, saying the Post article may have stemmed from the way it clumsily used "boilerplate language" in a letter to the newspaper. Frank Dorman, an agency spokesman, told reporters that the FTC "cannot confirm or deny whether any government agency is investigating Herbalife." Herbalife stock gradually rebounded from its morning selloff as the full story seeped out. Shares of the company finished the day up 44 cents at $35.51. Talk about a wild ride! Mr. Toad has nothing on Herbalife. Heck, a trip down Space Mountain is more serene than a trading day in this stock. Then again, look at the numbers -- and by numbers, we're not referring to the company's sales or earnings -- and it all makes sense. Herbalife is a $4 billion market-cap company with a 97 million share float that trades a whopping 14.6 million shares a day. Slightly over 36% of the stock has been sold short as of mid-January, making it ripe for quick downdrafts and powerful short squeezes higher. Dow component IBM, to pull a stock out of thin air purely for comparison's sake, has a $230 billion market value, 1.3% of its shares sold short, a float of 1.12 billion and daily trading volume averaging 3.2 million shares per day. That's right. IBM gets less than a quarter of the daily action than Herbalife does. And its products probably taste better to boot. Let's be honest. Reality has clearly left this stock. Fundamentals have been replaced by fun and games. And, quite frankly, it's getting tiring even for us.
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