Here's a news snippet from the LA Times, 3/12/97 which should be of interest:
No Deal at Herbalife: Mark Hughes, CEO of Los Angeles-based vitamin and weight-management-products marketer Herbalife International, thought he had a good plan for diversifying his estate: He announced on Jan. 31 that he would let go of about one-quarter of his stake in the company--up to 4.6 million shares--by transferring them to brokerage Salomon Bros., for cash. The brokerage would then sell to the public interest-bearing notes backed by the stock. At the maturity of the notes, in about three years, the investors would either receive the stock Hughes had set aside, or a cash payment from him.
However good it sounded to Hughes, the market has gotten in the way: With Herbalife stock having sunk 28% since the plan was announced, Hughes scrapped the idea Tuesday. Such swap transactions have become fairly common on Wall Street in recent years. In theory investors needn't be spooked by them, because there is no risk of a sudden deluge of new shares into the market that would depress the price.
But Hughes' plan followed by several months a heavy amount of selling by other Herbalife insiders. Investors may simply have decided that too many people in the know at the firm wanted to lighten their holdings, which is often taken as a hint that a stock is a better sell than a buy. The shares rose $1.25 to $19.13 on Nasdaq on Tuesday, still way down from $36.88 earlier this year. |
