Shares of the nutrition company Herbalife jumped up a sudden 9 percent this morning after news was released that 3 more seats on the company’s board would be taken over by advisers of Carl Icahn. These three additional people will give the billionaire a total of 5 seats out of 13 total on the company’s board if they all get elected. This news could mean a positive influx at the company, as it continues to battle allegations from the Federal Trade Commission about its distribution model.
Herbalife Shares Jump 9 Percent After Icahn Takes Control Of Board
Herbalife has been under investigation by the Federal Trade Commission for its business model, which chooses to distribute its products through independent agents. The company is alleged to be running a pyramid scheme that is using herbal supplements to legitimize its current operation. Most damaging to the company’s image is that another major shareholder in the company has been leading the attack against Herbalife despite having a significant wealth of shares in the business. The support of Icahn and his representatives seem to give hope to the company and to investors that they can move past this federal investigation and come out unscathed in the end of it.
The supplement supplier has remained steadfast in its defense that it makes no attempt to break the laws of any of the countries that it operates in, and that their distribution models are legitimate. Many times there are businesses like Herbalife that come under fire from authorities due to the nature of direct marketing and its close ties to the pyramid scheme business model. As long as Herbalife can convince the FTC that it is operating honestly and that its interest is in the distribution of their supplements, there should be little to worry about.
Herbalife Shares Jump 9 Percent After Icahn Takes Control Of Board.