By Dow Jones Business News,
January 23, 2014, 12:15:00 PM EDT
Herbalife Stock Falls on Senator's Letters
Shares of Herbalife fell more than 12% on Thursday after Sen. Edward J. Markey, (D., Mass.), filed letters asking the
Securities and Exchange Commission and Federal Trade Commission to examine whether the nutritional-supplement maker is
operating as a pyramid scheme.
Mr. Markey also sent a six-page letter to Herbalife Chief Executive Michael O. Johnson asking the company to further
detail the way it compensates distributors, its methods of operations, and whether Herbalife's marketing targets any
specific religious or minority groups.
Herbalife, which has vigorously denied being a pyramid scheme, said it would work with the senator to answer his
questions. "We received the letter from Senator Markey this morning and look forward to an opportunity to introduce the
company to him and address his concerns at his earliest convenience," the company said in an emailed statement.
Mr. Markey's requests were reported earlier by Reuters.
Hedge fund manager William Ackman cast a light on Herbalife in December 2012 when he accused the seller of nutritional
supplements of being a pyramid scheme and declaring he had made a $1 billion bet that the stock would fall. The shares
have risen steadily since then, as other hedge funds have bought the stock and defended the company's business model.
In the letters disclosed Thursday, Mr. Markey cited a family in Norton, Mass., that reportedly lost $130,000,
including their retirement savings, in investments with Herbalife. The senator asked the FTC to examine whether "false
and deceptive claims are being made about either the efficacy of Herbalife's products or the business opportunities
available to Herbalife distributors."
Shares of Herbalife are down more than 18% so far this year after more than doubling in 2013. The stock was down $9.31
at $64.22 in early-afternoon trading Thursday.
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