This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Mystery of Herbalife Deepens

Shares of HLF were temporarily halted on the news. It was also reported in April 10's Wall Street Journal that an email received late Tuesday from a former KPMG partner named Scott London, who had been in charge of the audits of HLF and SKX, said he "regrets my actions in leaking non-public data to a third party."

The Journal story mentions that London said his "leaks ... started a few years back" and he added that KPMG bore "no responsibility" for his actions. The FBI and the SEC are reportedly "investigating allegations of insider trading in the shares of certain KPMG clients, said people familiar with those probes."

Jim Cramer and Stephanie Link actively manage a Real Money portfolio for his charitable trust -- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

Since Herbalife has been mired in the much-publicized verbal sparring between Icahn and Ackman, the reports and the temporary halting of trading put the kibosh on HLF's share price. On April 8, shares of HLF closed at $38.39 on only 859,400 shares traded.


Once the rumors and news reports began flying April 9, a much different picture unfolded with HLF's stock. It traded 5,877,800 shares in a range between $36.21 and $38.95 and finally closed at $36.95. On April 10, the stock closed at $37.20 on less than half of the average daily volume of 6.4 million shares.

Herbalife reports first-quarter earnings April 29 after the market closes. Analysts estimate, on average, an increase in earnings per share of over 20% to $1.06. Revenue will rise more than 15% to $1.11 billion, they say.

Looking at the one-year chart of HLF, you can see the effects of the dichotomy between the diluted, year-over-year EPS and the trailing 12-month revenue-per-share. Add in the saga of Icahn versus Ackman, and you have a full picture that's either fraught with peril or ripe with auspiciousness. HLF ChartHLF data by YCharts

This is an ongoing story that offers both entertainment value and possible volatility for shareholders and potential investors. The importance for publicly traded companies like HLF and SKX to produce confirmations of the audited financial statements under these circumstances seems essential.

Most likely a re-audit of these companies' financial statements will need to be done by a new accounting firm, which will no doubt be rather expensive. Look for news from both as to how, when and at whose expense this process will be completed.

Traders may find many opportunities to "buy the rumors and sell the news" as this situation and the yet-to-be-resolved tug-of-war between the mighty activist investors continues. I'm putting a note on my desk to keep a close eye on HLF especially between now and April 29. Get ready, get set, not quite yet!

Disclosure: As of the time of publication, the author wasn't long or short shares of any of the companies mentioned in this article.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,465.15 -98.15 -0.59%
S&P 500 1,920.41 -10.26 -0.53%
NASDAQ 4,334.1280 -35.6450 -0.82%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs