Herbalife had a pretty rotten trading day on Monday after the company lowered its sales guidance due to new FTC guidelines.
There was one person who wasn’t going to let the company get off easy for this. It was famed investor and hedge-fund manager Bill Ackman who has been a long critic of the company and now things something is pretty suspect about Herbalife’s lower guidance.
He wrote in a statement to CNBC, “On May 4th Herbalife raised guidance driving the stock to new highs. Insiders including [CEO Michael] Johnson sold their stock and options. Fewer than three weeks after the stock sales, the company is now lowering guidance, somehow claiming that it is surprised by reduced volumes the first month the FTC settlement takes effect.”
He went on to say, “We also recently learned that Mark Friedman, the company’s general counsel and the only signatory of the settlement agreement with the FTC, and other top executives have left the company. Remarkably Herbalife has yet to disclose, let alone explain the reasons behind these departures.”
Herbalife has yet to deny or confirm that Friedman has stepped down from the company’s general counsel. It was also in
May that China Securities Journal reported that Herbalife’s head of its China operations had also stepped down abruptly.
Herbalife has not had any press releases to discuss these departures and nothing was disclosed to the SEC.
The FTC new regulations have also only been in effect in recent weeks. For the current second quarter, Herbalife has now called for revenue to be 1.5% lower. It’s no surprise that Ackman is responding this way. What gives Herbalife?
Disclaimer: We have no position in Herbalife Ltd. (NYSE: HLF) and have not been compensated for this article.