Shares of Nu Skin Enterprises surged Monday after the Provo-based company said Chinese regulators had slapped it and six employees with a relatively small fine for violations of business regulations.
Shares were up around 19 percent in midday trading following Nu Skin’s announcement of the equivalent of $781,000 by the Chinese government.
Chinese regulators had been investigating Nu Skin following a report by a short-seller and the People’s Daily newspaper that the company appeared to be operating illegally as multilevel marketer where commissions are paid to distributors who recruit others into their sales networks.
But Nu Skin said investigations by the Administration of Industry and Commerce had resulted in relatively small fines for the company that last week reported $3.1 billion in revenue for 2013.
Regulators fined the seller of anti-aging and other personal products $524,000 for improperly registered products and $16,000 for making unsubstantiated product claims, the company said. In addition, six sales employees were fined $241,000 for unauthorized promotional activities.
"We continue to believe in the potential of China’s large and growing market," Dan Chard, president of global sales and operations, said in a statement. "We remain committed to working cooperatively with the Chinese government to ensure the healthy, long-term growth of our business."
The company also was asked to increase the supervision of its sales representatives in China. Nu Skin said it was not aware of any other investigations ongoing in China.
Shares of Usana Health Sciences, another Utah multilevel marketer with operations in China, also were up near 10 percent in midday trading. Usana was not under any known investigations but apparently its share price benefited from the small fines imposed on Nu Skin that indicated it and similar companies would continue to operate in China.
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