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The latest move to hurt Herbalife's business comes from the inside: its main shareholder, Icahn Enterprises, has announced it will cash out at least 25% of its shares, with the intention of releasing more of them in the future. The information comes as no surprise, as several media outlets had been reporting the California-based company's financial irregularities for many years now. And now, as it seems, the dubious panorama the health product provider has been surrounded in has made waves among its shareholders.
Carl Icahn, head of Icahn Enterprises, has come forward and confirmed the release of $11.4 million worth of shares, almost 25% of its $45 million total ownership. Even with the release that has been announced, the firm is still the largest shareholder in the company. Icahn, a popular American investor who became known for his aggressive approach when buying assets from TWA – one of the biggest domestic airlines in the US – before its cease of operations, first became involved with Herbalife in 2012. On August 2016, he made a $16 million investment that later increased to $19 million after only two months. Given the current situation Herbalife is facing in the stock market, experts pointed out how this would prompt many of its biggest shareholders – Icahn included – to reconsider their initial investment. As of May 2018, the company registered a dramatic fall of 9.58% at the New York Stock Exchange. In a stern statement, Icahn Enterprises made it clear that their belief for the company had been sustained throughout the years – they are one of the longest-running shareholders and had never sold any of its shares before.
As their investment with Herbalife has become outsized, the firm considered a subtle strategy to step out of it. Herbalife is no stranger to controversy and unstable environments. Back in 2005, a California class action suit was filed, citing irregularities in their marketing practices based on undisclosed endless chain schemes, fraud and deceit. The case was solved after a $7 million payment was made to individuals part of the suit. In 2004, a class action suit – the biggest the company has had to deal with – was filed. This is where the claims of the company working on a pyramid scheme were first made public. Another $6 million settlement was made, with Herbalife not recognizing any guilt. Throughout the years, Herbalife was able to maintain a sustainable growth in the stock market, with a 49% annual increase reported only last year. As the panorama seems uncertain, some of its shareholders wonder how viable the company still is.