Rumors of Herbalife Rumors

I returned home today to find that Herbalife ($HLF – no positions) had spiked on “rumors of possibly going private.”  After a little digging, a friend sent me the insider trading complaint against former KPMG auditor Scott London, who is alleged to have passed inside information on HLF and other companies to his friend, Bryan Shaw.  The complaint talks about earnings-related information that London passed to Shaw about Herbalife, between March and May of 2011.   It also talks about some other companies where London passed info to Shaw, and then we get the source of today’s “rumor” – here’s the snapshot:

HLF_london

Read that. Do you see what happened?  London (In February, 2013) referenced RUMORS about Herbalife going private.  He explained to his friend HOW he should trade Herbalife, IF the rumors turned out to be true, which London would have knowledge of as a result of his audit position.

In other words, today’s “rumor” was just a re-reading of how someone would illegally trade on an old rumor if that rumor came to fruition.

I somehow doubt that those who bought the stock up from the $37 range to the $40 range today even knew the details of the rumor of a rumor that they were buying based on.

hlf_41113

related: my previous posts about Herbalife

-KD

 

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