Herbalife's Sudden Weight Loss May Present Opportunity |
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By M.E.Garza | |
Sunday, 06 May 2012 00:00 | |
![]() Under the terms of the repurchase agreement, Herbalife will pay $427.9 million on May 4, 2012 from the Company's cash on hand and from borrowings under the Company's senior secured revolving credit facility. The transaction is expected to be completed by no later than July 2012. Earlier in the week shares of the company had imploded following some very steady growth since the start of the year. Investors sold off stock in the nutrition and weight loss company following a series of questions from short-seller David Einhorn during a conference call regarding why the company did not disclose its breakdown of different kinds of distributors in its last regulatory filing. Apparently, Herbalife had stopped disclosing how many of its salespeople solely make their money from a recruitment model similar to the one used by Avon in which "salespeople" can also make money recruiting others to sell Herbalife products. This was something the company traditionally told investors, but during the conference call, the company's CEO responded that he and the other executives didn't think it was a valuable metric. Interestingly, after the call, the company disclosed on its website that its percentage of salespeople who were recruiters had dropped to 12%. That number was in the 20s a few years ago according to CNN Money. Skeptical investors began to jump ship and just when speculators who kept buying shares all the way down thought the bleeding was done, things seemed to only get worse one day after another. By Thursday evening, shares had lost nearly 25% of their value. For the past five quarters, the company has seen double-digit year-over-year percentage revenue growth and analysts do see a more positive outlook about the company's expected financial results, so this could be a set-up for a good trade-- particularly if shares move past levels of a key resistance in the $51 range. The stock buy-back should help do what it is designed to do: Spur more buying at these levels. In addition, given the hunger for "weight-loss stocks" seen in the market these days, some of the traction lost during the past few days may also help the stock catch on with speculators who may see this as good bottom bounce buying opportunity. Put this on your watchlist to see how shares react. ![]() "Featured Content" profiles are meant to provide awareness of these companies to investors in the small-cap and growth equity community and should not in any way come across as a recommendation to buy, sell or hold these securities. BiomedReports is not paid or compensated by newswires to disseminate or report news and developments about publicly traded companies, but may from time to time receive compensation for advertising, data, analytics and investor relation services from various entities and firms. Full disclosures should be read in the 'About Us Section'. Add this page to your favorite Social Bookmarking websites ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() |