Herbalife Shares Jump on Belgian Court Decision

(AP) -

Herbalife Ltd. said Tuesday that a Belgian court of appeals has overturned an earlier decision that found that the company was operating a pyramid scheme.

The decision sent Herbalife’s stock soaring nearly 7 percent.

Critics have long questioned the company’s business model, which uses a network of distributors to sell its nutritional supplements and weight-loss products around the world. That includes accusations that the company is a pyramid scheme, in which a company makes most of its money by recruiting new salespeople, rather than on the products that they sell.

Herbalife faced this accusation in the U.S. from hedge fund manager William Ackman and in Belgium from consumer organization Test-Aankoop. The latter led to the only court ruling in the company’s more-than-32-year history that it runs an illegal pyramid scheme.

The company said Tuesday that it always believed that the first judgment contained factual errors and was based on misinterpretations of its direct-selling sales method, and was confident that it would be overturned on appeal.

Herbalife said the appeals court found that its sales model is in full compliance with Belgian law. The company, which is incorporated in the Cayman Islands and based in Los Angeles, sells products in more than 90 countries.

Its stock jumped $4.80 to close at $76.65, but hit $76.83 earlier in the day – a 52-week trading high.