Reuters Insider - Trading at Noon: Herbalife stock drops on news of probe

Pacific Ventures

23/01/2014 19:22

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 Source:             Thomson Reuters                                   
                                                                       
 Description:        Massachusetts Senator Edward Markey is asking the 
                     SEC and the FTC for more information about the    
                     business practices of Herbalife.                  
 
 
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Transcript (May be auto-generated)

 A US Senator wants an investigation into Herbalife. Let's get right to it. The 
stock is plunging 13%. We have Svea Herbst-Bayliss. She is our Reporter in 
Boston. Svea, you just got off the phone with Senator Ed Markey's office. What's
the latest news on this? Good morning. Yes, Senator Markey from Massachusetts, a
Democrat, is now looking into the case against Herbalife- or on Herbalife. And 
his staffers have said that he's been involved in this since last summer. And 
today, he sent letters to not only the company, Herbalife itself, but also to 
the SEC and to the FDC- FTC in what he's calling a fact-finding mission. So what
prompted Senator Markey to send these letters exactly? He said that he's been in
touch with some constituents here in Massachusetts, including one family that 
alleges that it has lost $130,000 on its involvement with Herbalife, and another
woman who says that she has been pressured by Herbalife to keep buying more 
Herbalife products to sort of rise up in the sort of sales regime they have. So 
again, he's kind of jumping on a potential here that this is a pyramid scheme. 
He also, as you mentioned, sent a letter to the CEO of Herbalife. What's he 
looking for there? He's asking Michael Johnson, in simple English, to say how 
the Herbalife distributors are paid and what they can expect to earn. 
Specifically, he wants to know about how many compensation levels there are. At 
Herbalife, they call them the Founder's Circle, Chairman's Club, Millionaire 
Team, and have other names like that. And so he's looking to get some clarity on
that. And also he's looking- asking them specifically whether they target 
minority communities such as the Latino community or the Asian community. Svea, 
before we let you go, Bill Ackman - of course long-known for accusing this 
company of being a pyramid scheme, shorting the stock - are his fingers anywhere
near this and have we also heard any word from the other side, Carl Icahn and 
George Soros? That's a good question because Mr. Ackman, the billionaire Hedge 
Fund Manager, did meet with Markey's staffers last fall, but he did not meet the
Senator himself. This morning, Ackman was unavailable to speak to us. And Carl 
Icahn, who is the large shareholder in Herbalife, also was not available to 
speak with us. Interesting. Okay, story unfolding and the stock is plunging. 
Svea, thanks so much for joining us from Boston. You're welcome, thank you. 
Alright, moving along, looking at some hot stocks. 

We have to talk about Netflix of course, up 16%. This was the biggest performer 
of 2013 on the S&P 500, continues to climb. Flirting now with the $400 a share- 
stock price. Can 2.3 million new customers be wrong? It's also saying that it's 
going to dig in its heels when it comes to fees potentially being raised with 
that net neutrality case. So stay tuned for more on that. American Eagle down 
10% today on the heels of the abrupt announcement that its CEO, Robert Hanson, 
is leaving after two years- just two years. He was at Levis Strauss for 23 years
before that. Doesn't seem to be a successor in line at this company. This is the
continuing struggling teen retail section of those three A's. Abercrombie also 
wanted to oust its CEO but he's- at least one shareholder did rather. He's 
sticking around for a while. Anyway, comp sales down 7% for the quarter. 

He's out, stocks down today. Logitech, makes those mice – plural, I guess - 
the mouse for the computer. I have one stash in the drawer, haven't used it in a
long time. But up 20% on the NASDAQ- trades on the NASDAQ. Raised its full-year 
forecast. I don't know if those mice but it also has a lot more iPad, keyboards 
and covers and all kinds of gadgets for digital. So it's- things are looking 
pretty good over at Logitech. We're going to keep with tech and we're going to 
move to Mr. David Gaffen across the room here. You know him. You love him. 

Our markets guru here. Alright, a biggie- Microsoft, earnings come out after the
bell today. Let's talk about this because you think like Windows 8, meh; Xbox, 
meh; Surface tablet, worst than "meh" potentially. Right. So what's the big 
"wow" factor potentially that's really going to finally perhaps boost this 
company? Name recognition? I mean, Microsoft has been a little bit of a mess 
stock for a number of years now. It had a good year last year, at least in terms
of its stock price. And until last year, it was one of those that seem to 
perpetually trade between like $28 and $33 a share. And it throws off a lot of 
dividends and a lot of share buybacks. And it's become one of these things that 
a lot of stocks seem to be, a formally innovative company, known as a growth 
company but, now, it's content to really just sort of buy back shares and make 
per share earnings look a lot better. IBM is the same way. I mean, they 
certainly disappointed last week with its numbers but they "beat" estimates 
because of lower tax rate because they continue to buy back shares. 

So the "wow" factor here- well, they're still looking for a new CEO which is 
nice. Right. And you mentioned before about companies that are having trouble 
when their CEO just sort of announces that they're going to leave out of 
nowhere. Right. Now, on the other flipside of that, whoever they do hire, that's
not going to produce some sort of 10% jump in the stock price. I mean, you would
have to be a little silly to buy just on the name of a CEO who's going to run 
the company whoever she or he is. Yeah. But the question is really sort of over 
time, what can they do? 

And if you think about Microsoft as a company that sort of still got pretty 
established platforms, it's got a lot of money it makes from its ongoing sales, 
well, there's opportunity here to be something other than boring utility stock 
that it seems to have turned into. Alright, well, we'll have to wait and see, 
and take a look at that. Thank you for that great preview. Sure. And we're going
to move on now after Mr. Gaffen and we're going to wrap up things. Oh my 
goodness, as I almost wipe out on the wires here. But I'm not going to. Talking 
about gold because gold is rallying today. I'm taking David Gaffen - we're 
having a little comedy of wires here - off to the side. Gold is rallying today. 
Spot Gold up 2%. Looks to be some short covering going on here, at least in part
in reaction to India potentially reviewing import restrictions. Overall, gold 
ETFs had a pretty rough 2013. But we're going to take a look today at Market 
Vectors Gold Miners ETF which is up 5%. The ETF has a market cap of $1.3 
billion. That does it for us here at Trading at Noon. Follow us on Twitter: 
@ReutersInsider, and get more great videos, www.Reuters.com/ReutersTV. I'm Lisa 
Bernhard. This is Reuters