News of an investigation overseas sent shares of Nu Skin Enterprises (NUS) down sharply in Thursday morning trading. NUS stock tumbled almost 20%.
On Wednesday, The People’s Daily, a state-run Chinese newspaper carried a report that described Nu Skin as a “suspected illegal pyramid scheme.” Chinese regulators now indicate that they are probing Nu Skin over the allegations, Bloomberg notes.
A Canaccord Genuity analyst lowered his rating for NUS stock from “Buy” to “Hold” on the news.
The newspaper claimed that Nu Skin sells products in China that have not been cleared for sale by government agencies. The report also alleged that Nu Skin manipulates is sales trainees. Nu Skin disputed the report.
NUS stock had jumped almost four-fold in 2013. Nu Skin generated about a fifth of its sales in Hong Kong and China in 2012.
Nu Skin’s problems in China sent shivers down the shares of other multi-level marketers, including USANA (USNA) and Herbalife (HLF). USNA stock dropped almost 9% and HLF stock sank more than 7% in Thursday morning trading.