In an article today about the Usana Health Sciences (NASDAQ:USNA) buyout offer by Myron Wentz (Gull Holdings), the following inaccurate statement was made:
The Securities and Exchange Commission concluded during the first quarter USANA’s marketing model is not a pyramid scheme, but the stock has a short interest about 34 percent, meaning many investors are betting the stock will fall.
The SEC did not say that Usana is “not a pyramid scheme.” Nothing could be further from the truth, although company management would like you to believe that this is what the SEC said.
What really happened: The SEC closed its informal investigation of Usana without giving any reasons why. The SEC chose not to take the informal investigation to the next level and make it formal.
That’s the end of the story. What the SEC did was not any sort of endorsement of the company, and it doesn’t necessarily mean that the company is in the clear. It just means that the SEC decided not to continue investigating.
This type of irresponsible reporting really angers me. It is one of the reasons why pyramid schemes like Usana, Herbalife, Mary Kay, Pre-Paid Legal, and Primerica Financial Services continue to recruit new marks. They see statements like this by the Associated Press, and assume that they’re accurate.