Overhang in Herbalife Persists as Rumor of DoJ, FBI Investigation Tanks Shares

Shares of Herbalife Ltd. (NYSE: HLF) took a hit on Friday amid rumors that the Department of Justice and Federal Bureau of Investigation is investigating the company.

Fox News' Charles Gasparino tweeted Friday afternoon:

one note of caution on the @ABC2020 $hlf expose: theyre not exposes UNTIL they air and this one has taken months

— Charles Gasparino (@CGasparino) April 11, 2014

Shortly after the tweet, the Financial Times published a report saying “The US Department of Justice and the Federal Bureau of Investigation are investigating Herbalife, the multi-level marketing company that hedge fund manager Bill Ackman has alleged is a pyramid scheme, according to people familiar with the matter.” The article reported that Herbalife has not been accused of any wrongdoing and the company denied any knowledge of an investigation. Despite uncertainty around the investigation, the Financial Times wrote, “As part of its campaign to have Herbalife closed down and drive its share price to zero, Mr Ackman's hedge fund, Pershing Square, has published a series of dossiers on senior distributors who it alleges have helped perpetrate the pyramid fraud.” Gasparino kept his eyes on Herbalife and tweeted a note of caution regarding the alleged investigation

another note of caution on alleged FBI-DOJ of $HLF: according to a co official "noone from the fbidojhas EVER contacted the co"

— Charles Gasparino(@CGasparino) April 11, 2014

After the markets closed, Herbalife issued a press release in response to the rumors. The release stated, “We have no knowledge of any ongoing investigation by the DOJ or the FBI, and we have not received any formal nor informal request for information from either agency. We take our public disclosure obligations very seriously. Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments.” With the rumors supposedly put to rest, Charles Gasparino tweeted that a government source confirmed an ongoing FBI investigation

FBI looking at $HLF for months but investigation has turned up nothing substantial no case to be made as of now says law enforecmentsource

— Charles Gasparino(@CGasparino) April 11, 2014

Shares of Herbalife closed at $51.48 on Friday, down over 16% for the day.