Herbalife falls again on claim it’s a scheme

PORTLAND, Ore. — Herbalife Ltd.’s shares fell sharply for a second day on hedge fund manager William Ackman’s allegations that the nutritional supplements company is a pyramid scheme.

The chief executive of Pershing Square Capital Management said Wednesday that he has been shorting the company’s stock for months. (Short sellers earn money when a stock declines.) Ackman detailed his allegations Thursday at the Sohn Conference Foundation meeting in New York.

According to numerous reports, Ackman said Herbalife is misrepresenting some financial information to disguise the nature of its business. He alleged distributors make more money from recruitment than from sales, making it a pyramid scheme.


Herbalife signs up independent distributors to sell supplements. It denies the claim. Its chief executive, Michael Johnson, called the allegation ‘‘bogus.’’

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The company says many put options on its stock expire Friday and suggested the timing of Ackman’s presentation is suspect. Ackman denied he has any put options on the stock and said he will donate profits from his Herbalife stock to charity. (A put option is the opportunity to sell a certain number of shares at a certain price and date in exchange for an upfront fee.)

Herbalife’s shares fell nearly 10 percent to $33.70 Thursday.