Herbalife stock bounced back Friday despite the controversial nutritional supplement maker’s admission that it had overstated worldwide growth in customers and distributors.
The Los Angeles company, already mired in a dispute alleging the company operates a pyramid scheme, Thursday contradicted recent statements by a number of its executives about significant growth for the company. In response, the firm’s stock price closed down 7 percent at $52.42. However, the stock closed Friday up almost 3 percent to $55.37. The official statement from Herbalife acknowledging the executives’ errors insisted the wrong information had no impact on company finances.
“The errors do not impact the company’s financial statement in any way,” according to the company. “The cause of the problem has been identified and corrective measures have been put into place.”
The firm said the errors came about due to a new database being used starting in 2015.
According to the Los Angeles Times, the executives’ wrong information came mostly in conference calls that exaggerated customer and distributor growth. One example was a Feb. 23 call in which executives said the number of new members, excluding those in China, were up 8.3 percent for the year. The actual number turned out to be 3.4 percent.
The company said the misstatements were made in quarterly calls in August and November of last year and in the February calls. In another example, Herbalife’s chief financial officer was cited as saying “active” new member numbers were up 71 percent, but in fact the real number was 30.7 percent.
The Times termed the errors as the “most recent headache” for Herbalife. The company has been battling billionaire investor Bill Ackman for three years over what Ackman alleges is the company’s pyramid scheme mode of operation.
“That dispute revolves around the company’s business model of using customers or its members to sell its protein shakes and other supplements,” according to the Times, citing Ackman’s assertion that members cannot make money selling Herbalife products but rather only by recruiting new members. Herbalife denies Ackman’s assertions.
The Federal Trade Commission began investigating Herbalife in 2014, but the company last week said it’s in discussions with regulators about possibly resolving the probe.
— MyNewsLA.com staff