Herbalife (HLF) shares plunged more than 14% in Friday trading after The Financial Times reported that the nutrition company that hedge fund manager Bill Ackman has accused of being a pyramid scheme, is under criminal investigation from the U.S. attorney’s office in Manhattan and the FBI.
HLF erased all of its gains following the report, closing down $8.36 to end at $51.48 per share.
Herbalife told the FT they are not aware of an investigation.
“We have no knowledge of any ongoing investigation by the DoJ or the FBI, and we have not received any formal nor informal request for information from either agency. We take our public disclosure obligations very seriously. Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments,” the company said in a statement to the publication.
The announcement of a criminal probe from the Feds marks an achievement for Pershing Square’s Ackman, who in December 2012 placed a whopping $1 billion short against Herbalife’s shares, with a price target of $0. He believes the Los Angeles-based company, which markets its products through 3 million distributors in more than 90 countries, misrepresents sales figures and sells a commodity product at inflated prices.
Herbalife has repeatedly denied Ackman’s allegations, which have drawn criticism from billionaire investor Carl Icahn, who has amassed a 17% stake in the company. Icahn believes Herbalife is undervalued.
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