Herbalife shares slump amid talk big investor wants to bail

NEW YORK – Herbalife (HLF) is under heavy trading pressure on a news report that Carl Icahn, the company’s biggest shareholder and defender, has been trying to unload his stake.

Major players on Wall Street have used the company’s shares in a proxy war for years now after one of them, Bill Ackman, first called it a pyramid scheme in 2012.

The potential sale of Icahn’s stake, which was reported by The Wall Street Journal Friday, comes a month after the U.S. Federal Trade Commission closed its investigation of Herbalife and said it needs to rework the way in which it pays its salespeople. The FTC ruled that salespeople have to be paid for selling Herbalife products. Typically, Herbalife salespeople bought products and tried to get others to do the same.

Shares of Herbalife fell $1.43, or 2.3 percent, to $60.50. 

The FTC did not label Herbalife as a pyramid scheme, a victory for the company, but its description of its business model was essentially how a pyramid scheme operates.

It ordered the company, which has headquarters in Los Angeles, to put into place changes in its business model by May.

Shares, which are up 10 percent this year, tumbled 5 percent in afternoon trading.

Ackman, who runs the hedge fund Pershing Square Holdings, told CNBC Friday that he was approached by an intermediary who asked if he’d like to buy Icahn’s stake. Ackman and Icahn have argued about Herbalife publicly.

In a statement posted on his site, Icahn disputed Ackman’s account, saying he had in fact bought another 2.3 million shares in Herbalife on Friday. “I continue to believe in Herbalife,” Icahn said.

Three years ago, both called into CNBC, and Ackman called Icahn a bully and Icahn said that Ackman reminded him of a little boy crying in a schoolyard.

Ackman said Friday on CNBC that a sale by Icahn could shake confidence in the company. Icahn has an 18.3 percent stake in Herbalife, according to the data company FactSet, twice the size of the next largest stake.

“If Carl sells,” he said, “it can accelerate the demise of the company.”

Ackman said he believes Icahn wants to sell his stake before the mandated changes take place in eight months.

“I think he knows that this thing is toast,” Ackman said.

Representatives for Herbalife and Icahn did not immediately respond to a request for comment Friday.