Monday, March 20, 2017

HEDGE FUND HUMMER ON VALEANT

THE 4 BILLION DOLLAR SWALLAR* -

BSC, CA – Tis said the stock market is a humbling place, where even astute investors make many mistakes. William A. Ackman, a billionaire before he hit 50 and a master investor is a prime example of an Inside Job who is in the California spotlight now because of an insider trading suit happening here. The type of behavior is indicative of those like Sean Parker, another billionaire prevented from his inside job by a different billionaire. Crazy times and seemingly no country for a deviant man.


Today, things are very different for William A. Ackman. His company’s performance is way down, he is in the midst of an expensive divorce, and on March 13, he and the investors in funds run by Pershing Square Capital Management swallowed a $4 billion loss on Valeant Pharmaceuticals International, a beleaguered drug company. Big Pharma shot a wad. Gulp.

A little over two years ago, William A. Ackman, was one of Wall Street’s brashest and most self-assured hedge fund managers, and Valeant was a big Pershing Square holding. But several months after May 2015 Mr. Ackman and his investors began riding Valeant’s shares all the way from $262 to $11, driven both by rival investors who had bet against Valeant’s shares and former fans who dumped the stock as bad news emerged.

As much as Mr. Ackman and investors in his $11 billion firm would like to close the book on Valeant, they cannot do so quite yet. That’s because of a Valeant-related lawsuit in a federal court in California contending that he and his firm violated securities laws in 2014. According to the plaintiffs, Pershing Square secretly acquired a stake in the pharmaceutical giant Allergan based on nonpublic information from Valeant that it intended to mount a takeover bid.

This is not just any lawsuit. Damages in the case may be $2 billion, as noted by the judge who certified the litigation as a class action Wednesday. Mr. Ackman’s lawyers, who in court hearings have put potential damages at less than $1 billion, are vigorously contesting the case and contend there is no liability.


Defendants in the matter, which has not received a lot of publicity recently, are Mr. Ackman, his funds, Valeant and J. Michael Pearson, the company’s former chief executive.

The case is entering a crucial stage. Court documents indicate that Mr. Ackman and Mr. Pearson have either been deposed by lawyers for the plaintiffs or will be questioned under oath soon. The documents also show that Mr. Ackman must set aside 12 hours to answer questions.

Mr. Pearson was the architect of Valeant’s business model, in which the company acquired drugmakers and jacked up prices on their products. Mr. Ackman, 50, is one of the country’s best-known activist investors — taking large positions in companies and trying to use that weight to influence their direction and decision-making. Initially, Mr. Ackman praised Mr. Pearson’s strategy of acquiring rivals rather than developing drugs internally.

Mr. Ackman declined to comment on the mistakes he made in Valeant or the lessons he gleaned from the loss.

In a statement, Pershing Square noted that the firm “has generated billions of dollars of profits for its investors and double the stock market returns since the inception of the firm inclusive of our large loss on Valeant.”

“Unfortunately,” it continued, “we cannot guarantee that every one of our investments will be successful. We regret the loss which occurred due to Valeant board and management decisions made prior to our active engagement with the company. Over the past year, as members of the new board of directors, we have taken important steps to stabilize the company, including replacing prior management, which positions the company for a better and more profitable future.”



(Story link for original source and full article here. *- Beverly Hillbilly speak for 'shallow')

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