Herbalife Employs PwC as Auditor

Herbalife announced that it has hired PricewaterhouseCoopers LLP PWC.UL as its auditor. The firm replaced KPMG after allegations of insider trading. After the announcement was made, shares of the company increased 4 percent in afternoon trading. Investors saw the move as giving the company’s financial statements more credibility.

Herbalife’s stock price has been volatile in recent months after big name investors Carl Icahn, William Ackman, and Daniel Loeb fought over the company’s future. Loeb and Icahn said that the price should go up while Ackman said the company’s stock price would eventually drop to zero.

Ackman’s Pershing Square Capital Management got around $1 billion short position. Daniel Loeb and Icahn got the other side of the bet. Loeb has already exited his position in Herbailife with a %50 million profit. Icahn increased his stake and placed two representatives on the board.

Herbalife stated that PwC would audit the company’s financial statements for the fiscal year 2013. PwC would audit again the statements for fiscal 2011 and 2012. Ackman criticized the company as being a pyramid scheme but has spoken less against the company in recent weeks. But he sent a letter to investors last week that stated he stands by his statements before and argued that Herbalife should go out of business.

In the letter, Ackman said that the employment of a new auditor could be positive for his short thesis because re-auditing the company books could result to interesting disclosures. He added that each day Herbalife doesn’t have an auditor calls into question the legitimacy of the business in the view of investors.

KPMG resigned as auditor of Herbalife and Sketchers USA last month. It also parted ways with senior auditor Scott London. US authorities filed civil and criminal charges against London for allegedly passing non-public information about the companies to his golf partner Bryan Shaw, a jeweler.