FTC Herbalife Investigation: Boom or Bust?

NEW YORK (TheStreet) -- Wednesday was a volatile trading session for shares of Herbalife (HLF). 

Despite more allegations of wrongdoing by hedge fund manager Bill Ackman -- who has a rather sizable short position in the name -- the stock opened relatively strong. In fact, by 11:00 a.m. EDT, shares were higher by as much as 5%, to $69. 

A few hours later, the first big headline appeared: Shares of HLF, HALTED.

For an active trader, the word "halted" is one of the worst in the world. You're locked into a position that you have no way of exiting or hedging until it is resumes trading. 

Usually, when the security resumes trading, it's messy action and the trader either gets crushed, or makes a fortune. A real world coin toss. 

Shares of Herbalife proved no different, plunging down to $54, more than 20% off session highs. Then shares reversed higher by $6 from there, finally ending the day at $60.57. In mid-morning trading Thursday, shares were down about 5% at $57.60 on the Nasdaq.

Wednesday was crazy. But in the ensuing year, it's only likely to get crazier. 

The Federal Trade Commission yesterday served Herbalife with a civil investigation demand. Essentially, it is investigating the company for any wrongdoing. It should be pointed out that this does not mean the company is guilty of any wrongdoing, it's only being investigated for it. 

The results -- which may take up to a year, and possibly longer to find out -- could be the all clear! for bulls, or the opening of the floodgates for short-sellers. 

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