Herbalife, Nu Skin shares fall on worries about China market
NEW YORK, Aug 14 (Reuters) - Shares in multi-level marketing companies Herbalife Ltd, NU Skin Enterprises Inc and USANA Health Sciences Inc tumbled in high volume on Monday after a Chinese government website announced a crackdown on pyramid schemes.
The State Administration for Industry & Commerce of the People's Republic of China website posted a statement in Chinese. A translation in Google showed that the statement said the government was launching a three-month campaign against recruitment by pyramid sellers. The report did not name any of the three companies. (http://bit.ly/2w7YQKK )
Herbalife dropped more than 5 percent to end at a three-month low of $62.42, Nu Skin fell over 7 percent to $56.01, the lowest close since May 31. Direct-seller USANA Health Sciences tumbled 7.5 percent to $54.40, its lowest close since mid April.
The three fell in much larger than usual trading volume.
Even after Monday's drop, Herbalife stock remained up nearly 30 percent in 2017 and Nu Skin had gained 17.2 percent. USANA in 2017 has lost 11.1 percent.
China accounted for about 11 percent of Herbalife's revenue in the second quarter.
The report comes as big-name fund managers disclosed their holdings as of the end of last quarter, with Herbalife stock sometimes caught in the middle of large bets.
Capital Group Cos Inc filings on Monday showed its Herbalife stock holdings fell by 80 percent to 275,000 shares during the June 30 quarter. The company manages American Funds. Soros Fund Management dissolved a 5,100-share stake in Herbalife, filings showed.
Investor William Ackman is famously short Herbalife, saying it will crumble under regulatory scrutiny for what he has called a pyramid scheme. Herbalife has vehemently denied that claim.
Operators of pyramid schemes typically try to make money by recruiting new members, who pay fees, rather than relying on the sale of goods. (Reporting by Rodrigo Campos and Trevor Hunnicutt in New York, Noel Randewich in San Francisco and Molly Mu in Toronto)