Herbalife's stock plunges after disclosure of new member growth reporting errors
Herbalife Ltd.'s stock plunged 13% in premarket trade Thursday, after the nutritional supplements seller disclosed that it overstated growth in active new members because of "database scripting errors." The company said in a regulatory filing that it didn't find the errors earlier because of "limited visibility" into the likely rate of change in the "Active New Member" metric it used. Among some of errors originally reported on Feb. 25, fourth-quarter year-over-year growth in worldwide active new members excluding China was corrected to 3.2% from 16.7%, in U.S. active new members was corrected to 30.7% from 71% and in Europe, Middle East and Africa was corrected to 17.7% from 44%. For the third quarter, North America active new member growth was corrected to 1.8% from 33%. "The company has taken corrective action regarding these issues," the company stated in the filing. Herbalife said the errors do not impact historical financial statements. Prior to Thursday's premarket selloff, the stock had climbed 5.2% year to date, while the S&P 500 had slipped 2.8%.
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