Source: Courtesy Herbalife Ltd.
Shares of Herbalife Ltd. (NYSE: HLF) plunged about 14% on Friday following a Financial Times report that the U.S. Department of Justice and the FBI have each launched criminal% investigations into the company’s multi-level marketing practices. The Wall Street Journal reported late Friday that a source had told the paper that the “probe has been going on for months, and it isn’t clear if any laws have been broken.”
Herbalife said on Friday that it had “no knowledge of any ongoing investigation by the DoJ or the FBI.” So either the DoJ and the FBI are investigating the company without telling Herbalife — or somebody’s lying.
An attorney for Herbalife told The Journal, “We believe this is market manipulation through leaks, and we will turn over every stone to establish that.” The attorney also said that the company is cooperating with the Federal Trade Commission (FTC) which is conducting a civil inquiry into Herbalife’s business practices.
Hedge fund manager Bill Ackman who first charged that Herbalife was an illegal pyramid scheme in December of 2012 and took a massive short position in the stock has the most to gain from the federal investigations, which so far remain unconfirmed by either federal agency or Herbalife. Ackman has said he will go “to the end of the earth” to defend his charges against Herbalife.
So Herbalife is turning over every rock, and Ackman is going to the end of the earth. In the battle of clichés its still a draw. But in the public perception struggle, Ackman has gained a slight edge. He persuaded Massachusetts Senator Edward Markey to call for an investigation by the U.S. Securities and Exchange Commission.
Like the FTC investigation, an SEC probe would be a civil matter. But if the criminal investigations were acknowledged by the DoJ or the FBI, that would certainly put additional pressure on Herbalife stock.
Ackman’s also managed to chop Herbalife’s share price by more than 35% so far in 2014. The stock closed at $51.48 on Friday, down 14% for the day. Its low was $51.19. The shares have traded in a 52-week range of $34.72 to $83.51. That high was set in early January.
Based on a consensus price target of $85.50, the potential upside on Herbalife stock is a whopping 66%. The forward P/E ratio is just 7.32. Overall, investors appear to be taking a cautious approach to Herbalife shares — with some exceptions like Carl Icahn who has a 17% stake in Herbalife and 5 of 13 seats on the company’s board of directors.
TEN's recent rapid revenue growth has come with fairly stable income/loss figures, discounting the litigation costs that generated large losses the past two years.
Though the firm does have significant competitors, ATEN's impressive customer base and solid leadership team, along with its diversified product offerings, leads me to believe that the firm should be able to continue its impressive growth and push towards a return to profitability.
Coverage coming soon!!
Lead Underwriters: BofA Merrill Lynch, JP Morgan Securities LLC, Morgan Stanley & Co LLC
Underwriters: Oppenheimer and Co Inc, Pacific Crest Securities LLC, RBC Capital Markets LLC
it was Alibaba's 66% surge in revenue that dazzled investors. Macquarie's Ben Schachter says Alibaba's "phenomenal" growth is surprising since the company -- of which Yahoo owns a 24% stake -- had shown signs of a slowdown.
NQ Mobile Calls Selloff ’Ridiculous’ as It Buys Back Shares
By Ye Xie - Apr 15, 2014
NQ Mobile Inc. (NQ), the mobile-phone operator accused by short seller Carson Block of overstating revenue, said a two-day drop of 31 percent in its shares is “entirely unacceptable and ridiculous.”
The company said on its website yesterday that it bought back shares after the stock tumbled following a weaker-than-forecast earnings report April 10. The shares are down 45 percent since Block said in October the Beijing-based company was “a massive fraud.” NQ has denied the allegations.
NQ’s fourth-quarter earnings missed analysts’ estimates, renewing concerns that the company may have manipulated accounting. The decline was driven by one-time expenses, including the cost to refute the accusations raised by short sellers, NQ said yesterday.
“We are also continuing to consider other things as we deem this most recent selloff entirely unacceptable and ridiculous,” NQ Mobile said in the statement on its blog. “This extreme volatility will prove short lived.”
American depository receipts of NQ rose 14 percent to $12.60 yesterday, the first increase in four days. The losses in the previous two trading sessions wiped out $305 million in market valuation, according to data compiled by Bloomberg.
NQ reported adjusted earnings of 22 cents for the final three months of 2013, falling short of the median forecast of 32 cents in a Bloomberg survey of four analysts. It posted negative cash flow from operations of $2.26 million for 2013, compared with a positive cash flow of $9.96 million in 2012.
It also acquired 58 percent of Tianjin HuaYong Wireless Technology Ltd. in a series of deals between 2013 and the first quarter of 2014, according to the earnings release.
Block, founder of Muddy Waters LLC, said April 11 that NQ’s negative cash flow and the “highly suspicious” acquisition are further evidence of fraud. Block shot to fame in 2011 after his accusation that Sino-Forest Corp., a Chinese plantation company listed in Canada, was a fraud led to the company’s bankruptcy.
NQ said yesterday that it remains “confident” in its business and finances. Earnings fell short of estimates largely because of $8 million in one-time expenses, including fees related to forming a special committee investigating allegations. While it expects as much as $8 million in additional costs in the first quarter, it won’t affect NQ’s operational business, according to the statement.
The negative cash flow stemmed from the “extreme measures” the company took, including prepaying for game titles and other partners for services and paid down our accounts payables to vendors, it said.
* A10 Networks : Morgan Stanley starts with equal-weight rating
* A10 Networks : Pacific Crest starts with outperform; target price of $18