This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
TheStreet Open House

Herbalife Tumbles As FT Reports DoJ, FBI Probe

Stocks in this article: HLF

NEW YORK (TheStreet) -- The U.S. Department of Justice and Federal Bureau of Investigation have opened a criminal investigation into multi-level supplements-seller Herbalife (HLF - Get Report), The Financial Times reported late on Friday afternoon.

According to the FT's report, a criminal investigation may not lead to charges and will be led by the U.S. attorney and FBI's New York offices. The FT also said investigators have not charged Herbalife.

Friday's revelation hammered Herbalife shares and comes nearly a month after the company disclosed that the Federal Trade Commission opened a probe into its business practices. That probe was also first reported by the FT.

That move came over a year after hedge funder Bill Ackman of Pershing Square Capital Management took a $1 billion short position in Herbalife's shares and accused the company of being a pyramid scheme.

"We have no knowledge of any ongoing investigation by the DOJ or the FBI, and we have not received any formal nor informal request for information from either agency. We take our public disclosure obligations very seriously. Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments."

Herbalife shares tumbled nearly 14% in late Friday trading closing at $51.48. Shares have fallen over 20% in the past month, amid heightened regulatory scrutiny into the company's supplements business.

Since Bill Ackman made his short trade and accusations against Herbalife, hedge funders such as Dan Loeb of Third Point Management and Carl Icahn have taken opposing bets. Icahn has emerged as Herbalife's biggest supporter.

Amended Trade

After suffering large losses, Ackman amended his Herbalife trade so as to have synthetic short exposure to the company instead of a direct short. At an investor conference earlier this year, Ackman said his potential profit from the Herbalife short has grown. Around that time, Herbalife entered to a share repurchase agreement through a convertible note offering that Ackman said indicated the company might be struggling to obtain bank financing.

He also vowed to continue his fight against the company no matter the near-term performance and compared his trade to a short position in bond insurer MBIA (MBI) that eventually paid off.

Icahn's Board Seats

Billionaire activist Carl Icahn took the opposite of Ackman's trade. In 2013, Icahn cut a deal with Herbalife that gave him seats on Herbalife's board of directors and the right to buy up to 25% of the company's outstanding stock.

In March, Icahn took three additional seats on Herbalife's board amid departures by long-time directors. Icahn also confirmed he continues to hold his approximately 16% stake in Herbalife.

Icahn couldn't be immediately reached for comment on Friday.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

Jim Cramer's protégé, 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
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!

Markets

DOW 17,191.37 -195.84 -1.13%
S&P 500 2,002.16 -27.39 -1.35%
NASDAQ 4,637.9940 -43.5030 -0.93%

Partners Compare Online Brokers

Free Reports

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