Shares Of Herbalife Increase As Re-Auditing Comes To A Close

Shares Of Herbalife Increase As Re-Auditing Comes To A Close

Following the three-year re-auditing of the financial statements of Herbalife by PricewaterhouseCoopers , shares of the seller of nutritional supplements increased by at least nine percent recently as it went up to $75.

The increase came after the disclosure of the company that it received its re-audited financials. It also deals a blow to William Ackman, a hedge fund manager who called the company a pyramid scheme. Ackman also went up against the major stockholders of the company, including George Soros and Carl Icahn.

Among the major developments in the struggle of Herbalife was the resignation of the auditor of the company, KPMG, and the withdrawal of three years worth of financial statement following the insider trading charge against the partner of KPMG.

The company was expecting the re-audited financials within the year. Even as share prices have increased by over 100 percent for the year, the company has not given indications on any share buyback after the re-audited financials are received by the company. However, it has not stemmed market speculation that this may come in the future. A warning letter sent by Ackman attempted to delay or stop the re-audit.

The report on the re-audit of Herbalife comes as the Pershing Square hedge fund of Ackman struggled to reach double-digit returns for the year. It also comes as the hedge fund attempts to hold back negative performance following its bet against the company in 2013. The short trades of Ackman were restructured to strengthen his hedge fund against a short squeeze. However, Ackman has not surrendered his fight against Herbalife as he indicated that the company will not find it easy to obtain financial support for a huge share buyback.

Pershing Square indicated that the role of the auditor of the company is not to decide whether it is a pyramid scheme. Instead, it will establish whether the earnings of distributors from the recruitment of new distributor are bigger than its retail sales. A small number of Herbalife distributors earn from recruitment.

Posted by James Fried on Wednesday December 18 2013, 2:58 AM EST. Ref: Forbes. Link. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0