Does Herbalife’s CEO Resignation Signal a Bigger Problem?

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Herbalife Nutrition Ltd. (NYSE: HLF) has announced that CEO Richard Goudis will be resigning. Those close to the matter say that Goudis is resigning as a result of comments he made before he became chief executive. The company did not release any details about the exact comments but said late Tuesday that they were unrelated to Herbalife’s financial reporting.

This company has been under fire for years after being called a pyramid scheme by Pershing Square’s Bill Ackman, with none other than Carl Icahn coming to Herbalife’s aid. Since then, Ackman has stopped his bet against Herbalife, and Icahn has been selling his shares and taking a reduced stake in the firm.

Michael O. Johnson, the Herbalife’s executive chairman, who led the company as its CEO from 2003 to 2017, will reassume the role of CEO on an interim basis following the resignation of Goudis. The board of directors expects to select the permanent CEO from the company’s senior leadership team.

The company further detailed in the release:

Mr. Goudis’ departure is not due to any issues regarding the Company’s financial reporting, but pertains to comments which recently came to light, made by Mr. Goudis prior to his role as CEO, that are contrary to the company’s expense-related policies and business practices. The comments made were inconsistent with Herbalife Nutrition’s standards and do not reflect the company’s culture.

Separately, the firm announced preliminary volume point results for the fourth quarter 2018, which were up 11.6% worldwide year over year, and reaffirmed its initial full-year 2019 guidance as announced on October 30, 2018.

Shares of Herbalife were last seen up fractionally at $58.79 early Wednesday. The stock has a 52-week range of $34.17 to $60.41 and a consensus analyst price target of $62.60.