Herbalife Ltd. shares dropped more than 10 percent on Wednesday after a report that a well-known hedge fund trader had shorted the company’s stock.

Following the report on CNBC, William Ackma, founder of New York’s Pershing Square Capital Management LP, confirmed he has been shorting the stock of the Los Angeles weight loss and nutritional supplement company for several months.

Ackman said that he had researched the company for a year and considers its business model a pyramid scheme. He plans to present his thesis on Thursday at the Sohn Investment Conference in New York.

Herbalife Chief Executive Michael Johnson later told CNBC that Ackman’s comments were “blatant market manipulation,” pointing out that Herbalife put options are set to expire on Friday and speculators would benefit from a drop in stock price. A put becomes more valuable as the stock price falls relative to the strike price.

This is the second time this year Herbalife shares have been hammered by a noted trader raising questions about the company’s multilevel marketing business model, which has dogged the company since its early years. Products are sold by a global network of independent distributors who get a share of the profits from distributors they recruit. But there have long been concerns that many lower level distributors only join the company so they can buy products at a discount for personal use.

Shares dropped by more than 20 percent in May after David Einhorn of Greenlight Capital Inc. asked executives during a quarterly conference call why the company had stopped disclosing a breakdown of three groups of distributors. The furor died down after Einhorn declined to elaborate on any concerns he might have had about the company’s financials.

Herbalife shares closed down $4.52, or 11 percent, to $37.34 on the New York Stock Exchange.

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