Herbalife (NYSE: HLF) has been in a long standing battle with activist investor and short seller, Bill Ackman. During this feud, Mr. Ackman has done his best to prove that Herbalife (NYSE: HLF) is a pyramid scheme. As a result of Mr. Ackman’s claims Herbalife (NYSE: HLF) has be sued by investors more than once, accusing the company of fraud. However, courts recently found these claims to be unfounded. Today, we’ll take a look at the most recent case and the ruling it resulted in, how Herbalife (NYSE: HLF) stocks have reacted to the news, and what we can expect from the stock in the near future.
The Herbalife (NYSE: HLF) Lawsuit And Ruling
The lawsuit that was filed against Herbalife (NYSE: HLF) was relatively simple. Following claims by Bill Ackman that the company was a pyramid scheme, an investor decided to file a claim against Herbalife (NYSE: HLF) stating that he lost money investing in the company as a result of fraud. However, there hasn’t been any evidence that showed any wrongdoing. As U.S. District Judge, Dale S. Fisher explains on Bloomberg…
“Ackman’s allegations aren’t evidence that Herbalife committed fraud, so the lawsuit can’t show that the losses the shareholder suffered were caused by the company misleading investors…”
In the end, the case was dismissed and the investor was awarded nothing!
How Herbalife (NYSE: HLF) Stocks Reacted To The News
Herbalife (NYSE: HLF) stocks are up, and in a big way following the news that the court found that there was no evidence of wrongdoing by the company. After closing the day at $34.43 yesterday, the stock has climbed to $38.27 with a gain of 11.15% so far today.
What We Can Expect From Herbalife (NYSE: HLF) Moving Forward
With claims by Ackman that the FBI is investigating the company, followed by lawsuits, bad press, and more; fraud has been a big concern for investors recently. However, since the courts ruled against the claims, investors have a light at the end of the tunnel. The bottom line is that Herbalife (NYSE: HLF) is in no way committing fraud. As investors start to realize that, the stock will most likely continue to climb.
Keep in mind that after strong climbs, we tend to see drastic drops as the market corrects from too much movement too fast. So, we’ll most likely start to see those drops within the next 2 days or so. Nonetheless, I think that Herbalife (NYSE: HLF) will hold an overall uptrend for quite some time.
What Do You Think?
Will Herbalife (NYSE: HLF) continue to grow, or can we expect to see downtrends in the near future? Let us know what you think in the comments below!