NEW YORK (AP) — Herbalife's stock is surging more than 12 percent in premarket trading Friday after the seller of supplements and weight-loss products disclosed that it's in advanced talks to potentially settle a federal investigation into claims that it's a pyramid scheme.
Herbalife Ltd. said in a regulatory filing that the possible settlement with the Federal Trade Commission "would likely include a monetary payment and injunctive and other relief."
The company said that a number of issues are still open, however, and could prevent a final agreement being reached.
Herbalife said if talks don't continue to progress, litigation would likely ensue.
The company has been under pressure from activist investor Bill Ackman and his Pershing Square Capital Management LP for its business practices. He's claimed that Herbalife is running a pyramid scheme, which involves making money by recruiting more salespeople instead of through selling products. Such models are illegal because they eventually collapse once there are no more people to recruit.
Herbalife has defended its business practices, saying it is confident in the fundamentals of its business model, which it has said operates like a multi-level marketing company similar to Avon, Amway and Mary Kay.
Its shares climbed $7.28, or 12.5 percent, to $65.60 in premarket trading about 45 minutes before the market open.