A California 'pyramid scheme' lawsuit against Herbalife has been dismissed -- and the stock is surging

Herbalife has won the dismissal of a shareholder lawsuit in California that alleged that the nutritional supplements seller is an illegal pyramid scheme.

In a decision dated March 16, US District Judge Dale Fischer in Los Angeles said shareholders did not show that Herbalife inflated its stock price by misrepresenting itself as a legitimate multi-level marketing company.

Shares of Herbalife were last trading up $US4.03, or 11.71%, at around $US38.46.

For more than two years, hedge fund manager Bill Ackman, the CEO of $US19 billion Pershing Square Capital, has been very publicly crusading against Herbalife — a multi-level marketer that sells nutritional shakes and weight loss products.

Ackman has publicly said that he believes the company operates as a “pyramid scheme” that targets poor people, especially in the Hispanic community. Ackman, who has said he will take this “to the end of the earth,” is betting that the stock goes to $US0.

Herbalife has repeatedly denied Ackman’s allegations.

Here’s a chart:

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