Herbalife Ltd., the maker of namesake nutritional supplements, was questioned by the U.S. Securities and Exchange Commission about its disclosures, following similar questions from hedge-fund manager David Einhorn in May.
The SEC asked Herbalife why it viewed certain disclosures related to its distributors as immaterial to investors, according to a letter dated June 5 that was released Aug.8 in a filing. On July 11, the SEC said it had completed its review following an explanation from Herbalife, an additional correspondence shows.
Einhorn, chairman of Greenlight Capital Re Ltd., asked executives on a May 1 conference call why Herbalife had stopped disclosing a breakdown of three groups of distributors in filings that it had previously provided. The questions sent the shares down 20 percent that day and led to a three-day plunge. Einhorn hasn’t spoken publicly about the company since.
The SEC was reviewing Herbalife’s 2011 financial filing prior to Einhorn’s questions, according to an April 19 letter to the company. The agency turned its attention to the distributor breakdown only after the May conference call, the letters show.
“The documents speak for themselves, the matter’s closed and there’s no SEC investigation,” Barbara Henderson, a Herbalife spokeswoman, said today in a telephone interview.
Herbalife sells vitamins, shake mixes and skin gels through a marketing network of independent distributors in 81 countries. The distributors earn revenue by selling products directly to customers and recruiting new distributors, for which they earn a share of those sales and incentives from the company.
Herbalife declined 1.3 percent to $50.59 at the close in New York. The shares have fallen 2.1 percent this year.