The latest sequence of events began last Thursday, when Icahn revealed his 13 percent stake in the company as per a 13D filing, and also that he would be meeting with the company’s management to discuss strategies to increase shareholder value and manage the crisis. This was presumably the response, or at least the first salvo thereof, to Ackman’s spectacular December announcement of a $1 billion short position he was taking against the company.
Ackman accompanied the declaration of his monster short with accusations that Herbalife was in fact a pyramid scheme, and that the company was involved with misleading sales and hiring practices. Then the news leaked that the SEC was looking in to the company’s finances, which the company vehemently and repeatedly denied.
Both events have contributed to rather tumultuous fluctuations in the stock’s price over the last two months. Indeed, shares have been bouncing up and down between highs of $46.79 in early December, down to $26.06 by Christmas eve, all the way back up to $46.19 on Jan. 15, and then back down to $35.07 on Feb. 1, and then back up to $39.74 by yesterday’s close (with a great deal of mini-ups and downs in between).
The revelation of Icahn’s position last Thursday sent shares way up in after-hours trading (22.5 percent). And then on Wednesday, the company released its fourth quarter earnings report which topped analyst expectations. Sales were up 20 percent to $1.06 billion, beating the projected $1.05 billion, with forecasted profits for shares this year at $4.65 which topped analyst estimates of $4.63.
The company also revealed today that it had been complying with the SEC since December, when it asked for a meeting with commission’s enforcement officers to discuss the contents of the controversy. This was perhaps an attempt to retroactively pre-empt both the allegations from Ackman, as well as the rumors of an SEC investigation. The company also announced that it would be simplifying and refining the language of its financial information in order to be more comprehensible to investors.
Better-than-expected earnings reports, public displays of good-faith aside, and a 2013 performance in the positive by 20.65 percent notwithstanding, by mid-day Herbalife’s shares are down 3.9 percent to $38.20.
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