Herbalife gains on quarterly earnings

Traders work at the post that trades Herbalife stock on the floor of the New York Stock Exchange. File photo: Reuters

Traders work at the post that trades Herbalife stock on the floor of the New York Stock Exchange. File photo: Reuters

Published Jul 30, 2013

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New York - Herbalife, the nutrition company at the centre of a battle between Carl Icahn and Bill Ackman, surged after quarterly profit topped projections, widening an estimated loss on Ackman’s short bet on the stock.

The shares rose 5.8 percent to $64.09 in extended trading on Monday, after they had closed up 3.6 percent to $60.57 in New York, taking their gain for this year to 84 percent.

Herbalife has fought accusations from Ackman, founder of New York hedge fund Pershing Square Capital Management LP, that it is a pyramid scheme. The company has denied the allegations, saying its profit comes from the sale of unique products. In June, it disclosed a Nielsen survey that 7.9 million US adults bought its wares in the previous three months.

Ackman announced in December a short position, which is a bet that the stock will decline, in Herbalife of 20 million shares that has since soured with the stock’s rise this year. Based on Herbalife’s share price of $64.09 in late trading yesterday, he has lost about $310-million on the bet.

The estimated loss assumes Ackman put on the short position at a price of $48.58, the average between May last year, when he first shorted the stock, according to investors, and December 18, the day before he disclosed his short position. Ackman hasn’t provided details of his position and whether he is still betting against the Cayman Islands-based company.

Icahn, the 77-year-old activist investor, disclosed a stake in Herbalife in February and is now its largest holder with a 16.5 percent stake as of May 7, according to Bloomberg data.

Excluding some items, second-quarter profit was $1.41 a share, Herbalife said in a statement. That topped the $1.18 average of five analysts’ estimates, according to data compiled by Bloomberg. Profit this year will be as much as $4.95 a share, up from a previous projection of a maximum of $4.80, the company also said. Analysts’ estimated $4.78, on average.

Second-quarter sales volumes rose 49 percent in China and 33 percent in South and Central America, Herbalife said. - Bloomberg

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