New York - Shares of diet pill and supplement maker Herbalife Ltd. sank Friday after Gregory Probert, the company's president and chief operating officer, acknowledged exaggerating his academic credentials.
Shares fell $3.94, or 9 percent, to close at $40.08 Friday, and earlier traded as low as $38.68.
Herbalife said although his biography states he has a master's in business administration, Probert did not fully complete the requirements for his MBA at California State University, Los Angeles. He was, however, enrolled in the school's graduate school MBA program for 12 quarters in the 1980s, the company said.
The company said it will conduct its own investigation and will take any appropriate action.
The admission was prompted by an inquiry from the Wall Street Journal, which asked the company about Probert's MBA degree after fraud investigator Barry Minkow hired a private investigator to verify the biographies of Herbalife's executives.
Minkow runs the Fraud Discovery Institute after serving a sentence for fraud at his own former company ZZZZ Best Co. Minkow has been a vocal critic of Herbalife and is currently shorting the shares to finance his investigation of Herbalife in China and produce You Tube videos of "Herbalife victims." By shorting the stock, Minkow is betting the price will decline.
Goldman Sachs analyst Simeon Gutman said in a note to investors that he would surprised if Probert is fired, adding "his value to the Herbalife organization can not be overstated."
"Not only does he oversee many of Herbalife's day-to-day operations, he is often regarded as a key strategic thinker for the business," Gutman said.
The analyst added the development "has no fundamental implications" but that "to may just take some time for management credibility to be restored."