Direct-selling health and nutrition corporation Herbalife Ltd. (NYSE:HLF) may seem to be on the defense, especially as many of their high-profile critics are looking to go to war. One of these critics, Bill Ackman, was reported to have said that he would bet upwards a billion dollars against the company, which then saw stock prices drop for few days in the last week of December. Pershing Square hedge fund manager Ackman also claims that the corporation’s revenue generating plan is just a pyramid scheme. However, are these, and other actions from naysayers, enough for Herbalife shareholder to start selling?
Herbalife's Stunning Performance in the Market
The Jan. 7 trading day might not have looked promising for stakeholders, as did the drop in late December. Midweek, however, has seen share prices reach up to almost $42 from about $37 at the beginning of the week. Jan. 8 saw Herbalife Ltd. (NYSE:HLF) stock close at $39.95, which was a hefty 4.17% increase, or $1.60, from when it opened that day. Its trading range was pegged at $24.24 to a high of $73.00 for 52 weeks. After hours, there was an increase of $0.35, or 0.88%, which is not bad for a currently embattled, highly controversial stock, a phenomenon that Daniel Loeb is taking advantage of.
Creating Something Good from Bad
Third Point acquired a passive stake of 8.2% in Herbalife, just one day prior to the latter hosting a meeting to react to allegations of it being a pyramid scheme operator and help resolve any investor concerns. Herbalife is hosting a meeting with various analysts and investors to specifically clarify any issues about the business model, viewpoints on rules and regulations, as well as update the public about the growth potential it expects. Incidentally, Loeb also vows to clear the air with other critics present and lock horns with Ackman due to the latter’s claims. This move is definitely a strategic one for Herbalife and its investors, especially as this is bound to strengthen investor confidence. In addition to this, news such as the purchase of new industrialized facilities to increase manufacturing capacity for customers all over the globe will help bolster support for Herbalife Ltd. (NYSE:HLF). Other direct sellers have also seen their shares likewise drop due to pyramid scheme insinuations, including Nu Skin Enterprises, Inc. (NYSE:NUS).