Herbalife shares spiked 11.4 percent this week after an online Nielsen survey found that nearly 8 million Americans bought its products in the past three months.
After the survey findings’ release Tuesday night, the shares rose each day, closing yesterday at $48.33, up more than 3 percent from Thursday.
But the critics say the report doesn’t prove Herbalife’s case against hedge fund activist Bill Ackman, who called the company a pyramid scheme last December when he announced a $1 billion short against it.
Since then, Herbalife has vociferously denied his charges.
Nielsen is the second company Herbalife has commissioned to show the depth of its retail sales.
Herbalife said that the 7.9 million people who bought the products, according to the survey, includes 550,000 distributors.
An earlier Lieberman survey found a slightly smaller number of Americans buying the products — about 5 million.
But neither survey gives any indication of what percentage of the sales are made to end-users, either inside or outside its network.
A 1979 court case against Amway set 70 percent as the standard.
To know for sure, Herbalife should track its retail sales, which it could do, said Phil Dracht, the lawyer representing failed distributor Dana Bostick in a pyramid claim against the company.
Herbalife’s distributor agreements require salespeople to track all of their sales, buyers and prices. As part of a 1986 California injunction against the company, it is required to have such a system in place.
Similar companies, notably Tupperware, have said they have that detail. Herbalife has said it can’t provide it, and in a TV interview earlier this year, CEO Michael Johnson said he didn’t know it.
“The documentation of retail sales has been used . . . as a defense [against pyramid-scheme allegations] because it’s intended to show that the firm is not reliant on the continual recruitment of distributors,” explained Bill Keep, who is dean of the New Jersey College Business School and a multilevel marketing expert.