Herbalife Ltd. (NYSE:HLF) shares are up four percent after the company announced it has hired PricewaterhouseCoopers as its new auditor after going a month without an accounting firm.
Herbalife’s former accounting firm, KPMG, resigned in the wake of a scandal involving a former KPMG partner, Scott London, who admitted to giving secret information about Herbalife and Skechers (NYSE:SKX), two clients of the firm, to a friend in return for gifts. London was fired in April. His friend, Bryan Shaw, plead guilty to federal insider-trading charges. Shaw was able to make $1 million in profitable stock trades with the information from London.
Herbalife was already under scrutiny at the time after hedge fund manager William A. Ackman claimed that the company was a pyramid scheme. The Los Angeles based company sells nutritional products and supplements through a network of distributors. The company has denied Ackman’s accusations, saying it is a retail company that sells unique supplements, diet products, and cosmetics. Herbalife made a statement saying that KPMG resigned solely because of London’s crime, not because of, “Herbalife’s financial statements, its accounting practices [or] the integrity of Herbalife’s management.”
PricewaterhouseCoopers will immediately re-audit financial statements from 2010 through 2012, statements that KPMG withdrew following the scandal. Despite Ackman’s allegations, analysts say Herbalife stock is looking good. It is hoped that the re-auditing process will squash rumors that the company is a pyramid scheme. Hedge fund manager Carl Icahn took a rival position to Ackman, and since Herbalife stock is on the rise, it looks like Icahn’s prediction that Ackman would become victim of “the mother of all short squeezes” is coming true. Icahn has amassed stake in the company and two seats on the board following Ackman’s comments.
A spokeswoman for the firm said that PricewaterhouseCoopers is “well-positioned to perform an objective and quality audit for a company of Herbalife’s global reach and scale.”
Don’t Miss: Will Consumers Be Hurt By Obamacare?