Herbalife First Soars Then Dumps After FTC Settlement Report Is Denied
By Tyler Durden
Update: According to CNBC, there will be no imminent settlement report, which just confirms that as we warned in the original post, the NY Post continues to be mostly a source of disinformation and hedge funds peddling their own positions.
The market may be surging again, but that will hardly comfort Bill Ackman who later today is expected to report later today that his hedge fund remains roughly 20% YTD, or perhaps even worse following news from the NY Post, that his most hated stock ever, Herbalife, has reached “an agreement in principle with the Federal Trade Commission to settle a years-long probe into whether it was a pyramid scheme”, as a result of which the stock is soaring.
This follows the company’s announcement earlier this month that it was close to a settlement with the FTC.
As a reminder, the FTC’s probe into whether or not HLF is a pyramid scheme is also the basis for Ackman’s massive roughly $1 billion short in the name. If the FTC says no, then Ackman may have no choice but to cover.
This is what the Post reported:
An announcement of a deal could come as soon as Tuesday, sources said, although the agreement is not final and could still fall apart. Terms of the settlement — including what could be a sizeable financial penalty — could not be learned.
“I do not believe the FTC is requiring a substantial change in the business model,” a source close to the matter said. Herbalife has, though, agreed to pay a hefty fine, the source said.
The Los Angeles-based company has been operating under a cloud since Dec. 20, 2012, when hedge fund billionaire Bill Ackman announced a $1 billion bet that Herbalife was a fraud and that its shares would go to zero after regulators found it was a pyramid scheme.
The company has strongly denied the accusations.
The FTC subsequently opened a probe into the matter as did some state attorneys general.
The stock is already trading as if Ackman will have no choice but to cover, and was up 8% on the report (which however we would urge readers to take with 2 grains of salt, coming from a publication with a known axe to grind either for or against Bill Ackman in the past).
Source: Herbalife First Soars Then Dumps After FTC Settlement Report Is Denied
