Herbalife Ltd. (HLF:US), the maker of namesake nutritional and weight loss supplements, posted a record three- day decline in New York trading after hedge-fund manager David Einhorn questioned the company’s disclosures.
The shares fell 12 percent to $46.20 at the close in New York. That’s 34 percent below Herbalife’s closing price on April 30, marking the biggest three-day drop since the shares began trading in December 2004.
Einhorn, chairman of Greenlight Capital Re Ltd. (GLRE:US), 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.
Einhorn also asked for an explanation of financial incentives given to supervisors who sign up new distributors. The independent contractors 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.
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