Herbalife Ltd., the nutrition company under federal investigation for allegations of fostering a pyramid scheme, said it overstated growth of new customers a year ago because of database errors.
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“It puts a real hole in management’s credibility, as well as the story here that Herbalife is a healthy, growing business”, Tilson said in an interview with Vonnie Quinn on Bloomberg Television. However, the real increase in worldwide active new members was actually only about 3%.
Two of the 28 mistakes reflected incorrect time periods.
Shares of Herbalife fell more than 7% in morning trading, but they are up more than 66% over the past year.
Herbalife sells weight-loss shakes and nutritional products through independent salespeople – which it calls its members – in more than 80 countries. The stock, before Thursday, had risen 85% over the past year.
Herbalife, based in the Cayman Islands, has been locked in a legal battle with billionaire investor William Ackman, who has accused the company of being a pyramid scheme.
Herbalife has denied the claim and has sued Ackman – who has a $1 billion short bet against the company – for manipulating its stock.
Representatives of Mr. Ackman declined to comment Thursday.
The data is announced during the company’s earnings calls and is not included in its press releases or regulatory filings.
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The company said active new members worldwide grew 3.4 per cent instead of 8.3 per cent in 2015. The metric was misstated on calls in August, November and last month. It highlighted that this metric doesn’t make any impact on the periodic financial results filed with the SEC, or the historical consolidated financial statements. The real increase from the previous year was closer to 3%.
