Business

Herbalife bond 19% drop worries Wall Street

A steep drop in the price of Herbalife’s $1.15 billion in convertible bonds raised fresh concerns on Wall Street on Wednesday.

The bonds, which were issued in February, traded on Wednesday at 77.97 cents on the dollar, down sharply from their 96 cents price on July 28.

The bond price decline, about 19 percent, compares to a 26.2 percent drop in Herbalife’s shares price over the same period.

A more normal drop would have seen the bonds trade at about 87 cents, Wall Street experts said.

Such a steep decline points to possible financial issues at the company, convertible bond specialist Bill Feingold of Hillside Advisors told The Post.

Feingold said he has no view on the controversial Herbalife, currently under investigation by the Federal Trade Commission, which is looking into pyramid scheme concerns raised by activist Bill Ackman.

Ackman’s Pershing Square hedge fund has bet $1 billion the company is a pyramid scheme.

The Los Angeles company has strongly denied the accusation.

Under a pyramid scheme, salespeople earn more from recruitment than actual sales to consumers.

Herbalife shares closed Wednesday at $49.82, down 27 percent since the July 28 releases of its second-quarter results.

A second convertible bond expert highlighted the severe drop in Herbalife’s issuance by pointing to the converts of Cobalt Energy, which traded at $87.62 Wednesday following the company reporting its results — plus an enforcement action by regulators.

Cobalt stock has fallen by a similar amount as Herbalife’s since the February bond offering — but the bonds have held up better despite the company’s ills.

Convertible bonds typically fall only one-third as much as the underlying stocks.

“The current discount is nothing more than a natural reaction to the change in stock price,” an Herbalife spokeswoman says.