Herbalife is paying a $200 million fine, and its investors are having a great day.
The company, one of the most hotly debated on Wall Street, announced Friday that is was paying a huge fine to the the Federal Trade Commission, but as part of the settlement the FTC is also announcing that Herbalife is not in fact a pyramid scheme. The fine relates, in part, to misrepresentations the company made it sellers.
The news sent shares of Herbalife up sharply by 18% in early trading.
Although that doesn’t mean Herbalife is spotless. As part of the settlement, Herbalife has promised to “fully restructure” its business, according to the FTC. What’s more, the FTC says the company has agreed to be more transparent regarding its distribution model and begin tying its distributor compensation to actual retail sales—an issue that hedge fund manager Bill Ackman, who has publicly bet against the health supplements shares, has focused on as an issue.
In a statement, Herbalife stressed that settlement won’t impact much of its business.
The FTC opened a probe of Herbalife in 2014, following allegations made two years earlier by Ackman that it had a fraudulent business model that he compared to a pyramid scheme. Herbalife’s press release sought to stick it to Ackman, who has lost money for himself and his investors betting against the stock.
“And as for the short seller, I think we can all agree, as with his many other failed investments, it is time for him to show some of that ‘humility to recognize when you are wrong,’” Alan Hoffman, Herbalife’s executive vice president wrote in a statement, quoting from Pershing Square’s 2015 annual letter to investors.
Below follows Herbalife’s full statement on the settlement: