Friday, January 11, 2013
Titanic Battle Of Reputation
The question facing Herbalife's shareholders is who do you believe? The hedge fund manager shorting the company's stock, the hedge fund manager supporting it or the CEO defending its reputation? Herbalife is in the position of fighting for its existence with forces lined up on both sides. Shareholders are caught in the middle. If Herbalife is a pyramid scheme, the FTC will shut it down in the US and the short wins. If Herbalife can prove that it is a legitimate business, the company and its supporting hedge fund win. Shareholders will recover their investments too. Herbalife's stock price has plunged in the last year from a high of $73 per share to a low of $24.24. It has been a downhill ride on a roller coaster. One could not blame investors for abandoning the company whether or not its reputation is ultimately restored. It will be an interesting battle to watch and full employment for lawyers and PR firms.
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