Herbalife Ltd. soared 15 percent in early trading after Dow Jones reported that the company will announce a $200 million settlement with the Federal Trade Commission on Friday.
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Herbalife shares Friday morning surged as much as 13 percent on a report that federal regulators have determined the nutrition shake maker is not a pyramid scheme. They have since made up.
The Pershing Square Capital chief has had a long-standing and very public short position on the dietary supplement company.
But while those agreements will cause shifts in its business, and possibly across the direct-selling industry, the FTC isn’t accusing it of being the kind of fraudulent scheme Mr. Ackman and others have claimed for almost four years.
“While certainly we’ve been a patient investor here, I think this is the most attractive Herbalife has been from a risk-reward standpoint, and that’s why we stayed short”, he added.
Herbalife said it had agreed to restructure its US business so that distributors are rewarded for what they sell, not how many people they recruit.
Herbalife disclosed in 2014 that it was being investigated by the FTC for possible “deceptive practices”.
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At the end of June, about a quarter of Herbalife’s outstanding shares were held by short-sellers, according to Thomson Reuters data.
