Herbalife to buyback $427.9M in stock, shares fall

May 3, 2012

LOS ANGELES (AP) -- Herbalife said it will buy back $427.9 million of its own shares just days after investors sold off stock in the nutrition and weight loss company following a series of questions from David Einhorn during a conference call.

Herbalife said it's buying back the stock because it believes its shares are undervalued.

The acquisition, from Merrill Lynch International, will complete a previously announced $1 billion buyback program.

Herbalife shares tumbled $5.50, close to 11 percent, to $47.20 in heavy trading Thursday.

During the conference call Tuesday, Greenlight Capital's Einhorn asked exactly how much of the company's products are sold to consumers who are not distributors.

Einhorn also asked why the company did not disclose its breakdown of different kinds of distributors in its last regulatory filing, while it had in previous quarters.

Shares of Herbalife Ltd. immediately began tumbling. Since the beginning of this week, the company's stock has lost about 25 percent of its value.

Herbalife executives say they can't provide specific numbers regarding the percentage of its products purchased by consumers, rather than by distributors, who then resell them.

They also attributed the lack of a distributor breakdown in the company's last quarterly report to the hiring of a new chief financial officer, who didn't realize how important those details are to investors.

The total number of shares repurchased under Herbalife's agreement will depend on the company's average share price over the course of the program. The deal is expected to be completed by no later than July and the repurchased shares will be retired, the company said.

Last year, Einhorn sent shares of Green Mountain Coffee Roasters Inc. tumbling after he sharply criticized the company, calling its shares overvalued.

Shares of Green Mountain plunged 46 percent Thursday following a disappointing outlook late Wednesday. Stocks are trading close to a two-year low.