The Situation

Herbalife Nutrition Ltd (NASDAQ: HLF) shares – a global multi-level marketing corporation focusing on dietary supplements – plunged on Tuesday after announcing a proposed convertible senior note offering. As of 12:00 PM ET, Herbalife shares dropped by 18.85%.

The Explanation

Herbalife Nutrition went public on the NYSE on Dec 16, 2004, with 14.5 million common shares reaching its all-time high in Feb 2019 at $60.32 and is still at a 286.41% increase since its inception. However, YTD the company has dropped by 66.13% to $14.20 as of press time.

The company announced a proposal of a private offering of $250 million in convertible senior notes due in 2028. The company wants to grant the initial purchasers the opportunity to purchase up to $37.5 million worth of convertible notes.

The company said the net proceeds from this offer would be used to repurchase previous senior notes. Herbalife plans to use the money to repurchase a fraction of the existing 2.625% convertible senior notes that will mature in 2024.

See the $HLF chart performance here.

The Effect

Herbalife Nutrition stocks dropped upon the announcement of its proposed convertible notes. The investors' reactions happened due to the company planning to launch new convertible senior notes to repurchase a fraction of its existing convertible senior notes.

Since investors can't know for sure whether the company will pull this off, it is more important to focus on Herbalife's business. This is despite the company reporting $1.3 billion in net sales for Q3 of 2022.

See full $HLF flow at: https://unusualwhales.com/stock/HLF/flow-overview