Herbalife Ltd says that it is facing an inquiry from the Federal Trade Commission.
The nutrition and supplement company’s shares initially plunged more than twelve% following a short halt in trading pending the announcement.
Herbalife said that it received the civil investigative demand from the FTC on Wednesday. The FTC’s web site says that these are employed to investigate possible “unfair or deceptive acts or practices.” A representative from the FTC was not instantly accessible to elaborate.
The company, which has faced accusations of operating a pyramid scheme, stated that it welcomes the inquiry offered “tremendous sum of misinformation in the marketplace” about its business.
Herbalife says it believes it is in compliance with all laws and regulations and plans to cooperate totally.
The firm, which is integrated in the Cayman Islands and primarily based in Los Angeles, employs a network of distributors to promote its dietary dietary supplements and fat-loss goods globally.
The FTC inquiry comes just a day right after hedge fund manager William Ackman renewed his attacks on the organization.
Ackman has bet against the business and mentioned repeatedly that he believes it operates as a pyramid scheme, which is when a organization helps make most of its funds by recruiting new salespeople rather than on the products that they sell.
The head of Pershing Square Capital Management resumed this effort Tuesday, holding a public occasion to detail his firm’s claims of how Herbalife is working as a pyramid scheme in China, violating laws there. Pershing declined to comment Wednesday on the FTC investigation.
Herbalife has repeatedly denied the claims and rival investor Carl Icahn has disagreed as well, taking his fight against Ackman public and escalating his stake in the business.
Its shares fell $ three.81, or five.eight%, to $ 61.58 in mid-afternoon trading following falling as lower as $ 54.59 earlier. Its shares had fallen almost 17% so far this yr via Tuesday’s near.