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Nu Skin Faces Troubles in China

Investors are waiting for more details on the size and scope of the issues.

Speculation that a settlement with the Chinese government was near boosted Nu Skin Enterprises Inc.’s stock price as high as 12.7 percent to $81.85 at one point on Wednesday.

But by late afternoon, Nu Skin’s stock had returned to the mid-$70 range, as fellow direct seller Herbalife Ltd.’s shares began falling after the firm revealed that it received an inquiry from the Federal Trade Commission earlier that day.

The FTC inquiry is exactly what activist investor William Ackman of Pershing Square Capital Management has been pushing for, asserting for more than a year that Herbalife is a pyramid scheme.

Nu Skin, meanwhile, is fighting a battle of its own. The company launched its own internal review of its China operations following reports from the Chinese newspaper People’s Daily in January that questioned the direct seller’s recruiting and selling practices.

Investors are waiting for more details on the size and scope of Nu Skin’s troubles in China. During an earnings call on March 3, Nu Skin president and chief executive officer Truman Hunt told Wall Street analysts, “We elected to voluntarily suspend business promotional meetings as well as the engagement of new salespeople in China to cooperate with relevant authorities and demonstrate our commitment to our policies.”

The company said it is unable to predict the timing and outcome of its internal review of Nu Skin’s China operations.

“We are committed to doing what we need to do to succeed long term in China,” said Hunt.

Nu Skin closed at $77.89, up 6.53 percent, on the New York Stock Exchange on Wednesday.