Strengthening fight against financial pyramids in China led to tumble of shares of Herbalife and Nu Skin

Almaty. August 15. Silkroadnews – Strengthening fight against financial pyramids in China led to tumble of shares of Herbalife and Nu Skin, Reuters reports.
“Shares in U.S. multi-level marketing (MLM) companies Herbalife Ltd, NU Skin Enterprises Inc and USANA Health Sciences Inc tumbled in high volume on Monday after a Chinese government regulator announced a crackdown on pyramid schemes. China’s State Administration for Industry & Commerce (SAIC) earlier that day announced on its website that it was launching a three-month campaign against recruitment by pyramid sellers. The report did not name any of the three companies”, the report says.
Herbalife shares (HLF.N) fell more than 5% to a three-month low of $62.42, Nu Skin (NUS.N) fell more than 7% to $56.01, which is the lowest close since May 31. Direct sales of USANA Health Sciences (USNA.N) dropped 7.5% to $54.40, the lowest since mid-April.
As reported, all three companies did not give any comments.
According to publication, strict measures by the SAIC followed the death of a young graduate of the Chinese university, who fell victim of MLM company he came across on a job-seeking website. This caused a violent reaction in society and a wave of indignation in internet.
“Operators of pyramid schemes typically make money by recruiting members, who pay fees to act as salespeople of goods such as health supplements, rather than relying on the sale of the goods themselves. The regulator said in its statement that MLM activities in China were causing widespread concern as people were being misled into participating and had suffered serious damages as a result”, the report reads.
The Chinese police and ministry of education will be involved in the fight against MLM. They will investigate the activities and recruitment methods of MLM companies with special attention to be paid to those companies that target college students and job seekers. Companies that committed violations will be punished or even shut down.
According to publication, China accounted for about 11% of Herbalife’s revenues in the second quarter.