The State Administration for Industry & Commerce of the People’s Republic of China website posted a statement in Chinese. A translation in Google showed that the statement said the government was launching a three-month campaign against recruitment by pyramid sellers. The report did not name any of the three companies.
Herbalife dropped more than 5% to end at a three-month low of US$62.42, Nu Skin fell over 7 % to US$56.01, the lowest close since May 31. Direct-seller USANA Health Sciences tumbled 7.5% to US$54.40, its lowest close since mid April.
The three fell in much larger than usual trading volume.
Even after Monday’s drop, Herbalife stock remained up nearly 30% in 2017 and Nu Skin had gained 17.2%. USANA in 2017 has lost 11.1%.
China accounted for about 11% of Herbalife’s revenue in the second quarter.
The report comes as big-name fund managers disclosed their holdings as of the end of last quarter, with Herbalife stock sometimes caught in the middle of large bets.
Capital Group Cos Inc filings on Monday showed its Herbalife stock holdings fell by 80% to 275,000 shares during the June 30 quarter. The company manages American Funds. Soros Fund Management dissolved a 5,100-share stake in Herbalife, filings showed.
Investor William Ackman is famously short Herbalife, saying it will crumble under regulatory scrutiny for what he has called a pyramid scheme. Herbalife has vehemently denied that claim.
Operators of pyramid schemes typically try to make money by recruiting new members, who pay fees, rather than relying on the sale of goods.