‘I should have sold earlier,’ Ackman says
Investor admits mistake onValeant as his exit sends firm’s shares tumbling
Valeant Pharmaceuticals International Inc. stock slumped to the lowest since 2009 on Tuesday after Bill Ackman, once its biggest champion, exited the drugmaker at a loss.
After waging a costly and outspoken public defence of the controversial company, Ackman said late Monday that he sold his entire stake and would leave the board.
The shares, already down more than 90 per cent since their August 2015 peak, dropped 10 per cent to close at US$10.89 in New York. The bonds also declined, to their lowest since December.
“Now with its largest shareholder and one of its most-vocal supporters selling its stake near the low for the past 10 years, we see this as a vote of no confidence for the stock and that things are continuing to go from bad to worse for Valeant,” Wells Fargo & Co. analyst David Maris, who rates the stock the equivalent of sell, said in a note to clients.
Billionaire Ackman’s big, concentrated bets and brash personality have made him one of the most polarizing names in investing. He decided 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 — after a lengthy campaign to turn around the company and salvage his investment.
Ackman said that he “should have sold” earlier, and that it was a mistake to stick with the stock as long as he had, CNBC reported Monday, citing a telephone interview with the investor.
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.
While precise figures are hard to come by, public filings suggest that Ackman’s Pershing Square Capital Management may have lost US $2.8 billion just on the Valeant shares it owned at the end of 2016, with overall losses likely to be much higher.
Valeant’s most actively traded debt also lost value on Tuesday.
“The hits just keep comin’ for Valeant,” Gimme Credit LLC bond analyst Vicki Bryan, who advises selling the bonds, said in a note to clients.
Ackman’s exit follows last week’s surprise decision to restructure its bank debt, and it now looks even more unlikely that Valeant will be closing any sizable asset sales in the near future, Bryan wrote.
Pershing Square representative Steve Fraidin will also leave the board at the next annual meeting. The investment, which represents about 1.5 per cent to three 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, said in an emailed statement.