Short squeeze alert? Shares of Herbalife (HLF) - Get Report are soaring Friday, up roughly 25%, after the company topped earnings per share and revenue expectations and provided very bullish guidance.
But that's just part of it, according to TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio.
On CNBC's "Mad Dash" segment, Cramer referred to CEO Michael Johnson's conference call comments, where the exec told investors the nutritional supplements company is closing in on resolving issues with the Federal Trade Commission.
That's not to say there won't be penalties, Cramer said. As Johnson explained, "A possible range of outcomes include the filing by the FTC of a contested civil complaint or further discussions leading towards settlement, which could include monetary penalties and other relief, or the closure of these matters without action."
The fact that a resolution may be on the table is scaring short-sellers, Cramer added, because that would essentially crush the idea that shares are going to zero, as notable short-seller Bill Ackman has stated.
In order for the company to go under, government intervention was required. But if an FTC settlement is on the table, that means the full-fledged bear case isn't likely to pan out. "The fact that there could be a resolution is scaring the bears," Cramer concluded.
At the time of publication, Cramer's Action Alerts PLUS had no position in companies mentioned.