Media may have serious impact on companies worldwide. Any information that enters media either raises a corporation’s rating and popularity, or has a destructive impact on it by creating a negative image, which has a direct impact on capitalization of the company and its shares. Last week New York Post published information that has cast serious shadow on world-known company Herbalife. It is evident that the newspaper and Herbalife will have long and serious handling in future. There emerges a question: should have the highly-authoritative publishing house have raised the issue at the drop of a hat? What is more, the topic has not even been officially proved?
New York Post : Herbalife has Problems with Federal Trade Commission
In particular, New York Post published information on the fact that numerous claims on Herbalife company have been received by Federal Trade Commission within the course of previous seven years; the total number of claims has amounted to 192. The newspaper refers to a source from the Commission, which has informed that law enforcement authorities have started the investigation of Herbalife company. New York Post has held its own investigation, thus having connected the issue with a scandal at the end of 2012. At that time the Managing Director of investment fund Pershing Square Capital Management Bill Ackman called Herbalife company “the most effective pyramid in history”, which sounded more like offence, rather than compliment. He motivated his statement by the fact that Herbalife spent most time on attracting new workers, but not on selling its goods, as informed by the “Market Leader”.
The information was published on February 4; on this very day the shares of the company have dropped by 11 percent and cannot recover till now. Herbalife had to react right away. Next day the company has published a response statement. It described the company’s position and demanded the New York Post to deny the information. In particular, the statement informs that Herbalife has no problems with regulatory authorities; the latest contact between the structures was at “investor’s bottom” in January 2013. Moreover, there is no information about the started investigation of the company. Since its foundation in 1980 Herbalife has been showing positive impact on its clients, as claimed in the statement. The number of claims into Federal Trade Commission is rather low ion comparison to other companies. In this reference, every address of the company’s client to FTR is duly rendered by Herbalife. The company says that it pays tribute to its distributors and consumers.
External Factor Exploded the Reputation: What will Happen with Shares
Everyone is looking forward to new response of the New York Post or an official statement from Federal Trade Commission. According to some experts, the company’s shares will be exposed to serious risk in the nearest future. Information published in the newspaper is an important external factor, which has a direct impact on the results. The company itself has enumerated over ten consequences, which may influence its achievements and results. They include critical economic environment, unlawful actions of employees, international activity risks, relations with distributors. No matter what the final result will be, the newspaper has managed to explode the company’s reputation.
It is worth mentioning that Herbalife management has taken right and effective measures by publishing a release with official statement. As soon as this was done, the company’s shares started recovering, namely, following the extreme drop by 11 percent on February, the shares started rising. This increase is yet slightly felt; however, the fact that Herbalife securities are not getting cheaper gives hope to investors. On February 7 the company’s shares have increased by 0.36 percent at New York exchange NYSE.
Last year has not been the easy one for Herbalife. In May 2012 the company’s shares dropped by 20 percent after a publication about its record earnings during the first quarter of 2012. At that time manager of Greenlight Capital hedge-fund David Einhorn asked about the volume of the company’s products that is sold to final consumers; this has baffled the company’s president Desmond Walsh. Some experts supposed that Einhorn has intentionally played on lowering, whereas others have suspected Herbalife in manipulations with shares. The company’s shares managed to recover within some time.
Herbalife Ltd. Is an international organization that sells goods for weight optimization, foodstuffs, and personal hygiene products, which favour a healthy way of life. The network of independent distributors makes the company’s products available in 87 countries worldwide. The company was founded in the USA in 1980 by Marc Hughes. Herbalife has always been surrounded by rumours and critics. At the same time, this does not hinder the company to hold wide advertizing campaigns and attract famous people. It provides help to the family fund Herbalife and Casa Herbalife program, which is directed at improving nutritional conditions of children belonging to the risk group. Herbalife is widely recognized around the world.
