Billionaire Bill Ackman sells off shares in Valeant, with losses hitting at least $2.8 billion,
Bill Ackman had championed the pharma firm, once saying shares would hit $448 by 2019
NEW YORK— Bill Ackman has finally conceded defeat on Valeant Pharmaceuticals International Inc.
After waging a costly and outspoken public defence of the controversial drugmaker, its once-biggest champion sold his entire stake in the company at a loss and said he will leave the board.
Precise figures are hard to come by, but public filings suggest that Ackman’s Pershing Square Capital Management may have lost $2.8 billion (U.S.) just on the Valeant shares it owned at the end of 2016, with overall losses likely to be much higher. The shares have plunged more than 90 per cent from their peak.
Billionaire Ackman’s big, concentrated bets and brash personality have made him one of the most polarizing names in investing. His decision to give up on Valeant, a favourite among hedge-fund types before probes into its business practices, accounting and drug pricing caused a collapse in the shares, comes after a lengthy campaign to turn around the company and salvage his investment.
The sale ends a near three-year saga that first saw Ackman team up with Valeant in a hostile bid for a rival, before later making a direct investment. Over the same period, regulators intensified scrutiny of the drugmaker, its management and the board were overhauled, and its value was decimated.
Pershing Square sold its entire stake in Valeant Monday and said that Ackman, along with fellow Pershing Square representative Steve Fraidin, will leave the board at the next annual meeting. The investment, which represents about 1.5 per cent to 3 per cent of Pershing Square’s funds, required “a disproportionately large amount of time and resources,” according to a statement Monday.
“We appreciate the support and guidance that Bill and Steve provided during a challenging time,” Joe Papa, Valeant’s chief executive officer, said in an emailed statement. “Serving on the board of a company undergoing a transformation requires a significant commitment and we accept their decision not to stand for re-election.”
As of mid-December, Pershing Square held 18.1 million Valeant common shares along with call options to purchase another 9.1 million shares, according to regulatory filings. Pershing Square paid an average of $166.11 a share for the Valeant stock that it purchased outright, not counting proceeds received for subsequent stock sales or options transactions.
Based on the average price paid, Ackman’s hedge funds would have lost about $2.8 billion on the sale of the 18.1 million shares that they held outright. That assumes the stock was sold at $11.25 a share, the midpoint of the offering price.
Jefferies Group LLC offered Pershing Square’s 27.23 million Valeant shares Monday for $11.10 to $11.40 apiece, according to a person familiar with the process who asked not to be identified discussing private information.
Though Pershing Square only disclosed its investment in Valeant in March 2015, the relationship between the two goes back a year earlier.
In 2014, Ackman’s fund had teamed up with the drugmaker in a hostile bid for Allergan Plc, which was thwarted when Allergan agreed to be acquired by Actavis Plc. Valeant and Ackman are now facing a shareholder lawsuit over alleged insider trading involving the failed deal for Allergan.
Valeant, once a darling of Wall Street, has seen its shares plummet more than 90 per cent since August 2015 amid a spate of investigations involving its pricing strategy and the use of a now-defunct mail-order pharmacy to help sell drugs. Until now, Ackman has stood by Valeant, at times being its most vocal advocate. In 2015, he held an hours-long conference call to defend his investment, and even predicted the stock would reach $448 by 2019.