Herbalife Crashes After NY Prosectors File Criminal Charges Accusing It Of China Bribery Conspiracy

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by Tyler Durden
Friday, Aug 28, 2020 - 10:26 AM

17 months after Ackman finally capitulated on his famous Herbalife short, and 6 years after the legendary brawl between Ackman and Icahn over the fate of Herbalife, it now appears that Ackman may have been right after all, even if his timing was off.

Moments ago, Herbalife stock crashed over 12%, its biggest drop since March, and was halted after federal prosecutors in New York brought criminal charges against the health supplement maker. 

In sympathy peer companies Nuskin and Usana, both tumbled on the Herbalife news.

Prosecutors unsealed an indictment Friday in federal court in Manhattan, according to which Herbalife was charged with a China bribery conspiracy.

Specifically, prosecutors unsealed an indictment Friday in federal court in Manhattan alleging that Herbalife from 2007 to 2016 provided corrupt benefits to Chinese officials, including those with government agencies and media outlets, to increase its business in that country. In short, Herbalife was doing precisely what every other US company allowed to operating in China has been doing.

Curiously, earlier this month Carl Ichan presciently sold 14.7 million shares, or $716MM, in Herbalife stock this month, offloading 42% of his position to, while a company director also sold a half-million worth last Friday. The list of top HLF holders is shown below.

However, this too may be much ado about nothing. As Bloomberg details, at a hearing Friday, federal prosecutors said they had reached a deferred prosecution agreement with Herbalife relating to one count of conspiracy to violate the U.S. Foreign Corrupt Practices Act. In other words, there is already a settlement in place, which means that the Robinhood BTFD daytrading hordes are about to send the stock green by the end of day.