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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of weight management and nutrition supplement networking company Herbalife (NYSE: HLF ) shed as much as 15% of its value following the disclosure from activist hedge fund manager Bill Ackman said he was short-selling the stock.
So what: As reported by CNBC, Ackman confirmed via email that he has indeed been shorting Herbalife for the past seven or eight months and believes the stock to be a pyramid scheme and one of the best shorting opportunities he's seen. Herbalife CEO Michael Johnson has repeatedly reputed Ackman and fellow short-selling activist David Einhorn's postulations that Herbalife is a multilevel marketing scheme, and he called today's actions nothing more than "blatant market manipulation ... a day before certain Herbalife put options expire."
Now what: Whether or not Herbalife is a pyramid scheme means little to me, as I tend to want to avoid the stock based on its business model alone. Weight control and nutrition supplement companies are very susceptible to the ebb-and-flow nature of consumer discretionary spending, and customer loyalty within the sector is practically nonexistent. I'd just as soon avoid the situation altogether.
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