Why Herbalife Ltd. Stock Popped More Than 10%

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What happened

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Shares of Herbalife Ltd. (NYSE: HLF) were surging today after the company announced the results of a self-tender offer, or an offer to buy back its stock from investors.

The nutritional supplement company had offered to purchased up to $600 million of its stock at a price between $60 and $68 and said it had acquired 6.7 million shares in that range. The market seemed to interpret investors' relative unwillingness to sell as a positive, and pushed the stock up 11.2% at closing. 

So what

Herbalife said it spent $457.8 million, or 7.2% of the company's total shares outstanding as of the preliminary count. The share repurchase also helps the stock by limiting the share count and boosting earnings per share. 

The multi-level marketer is a battleground stock; hedge fund manager Bill Ackman made a high-profile short bet on the company years ago, accusing it of being a "pyramid scheme." Today, more than a third of shares are sold short, and a short squeeze could have helped push the stock up also.

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Now what

The market is likely to continue to debate over Herbalife, but Ackman and the shorts appear to have lost. After Ackman made a case against the company to the Federal Trade Commission, it fined Herbalife $200 million last year, a relative slap on the wrist, and refused to label it a pyramid scheme. Today's news seems to indicate most investors believe the stock will move higher, as it's approaching a five-year high. Still, the usual volatility should remain as the company is likely to suffer similar accusations.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.