Top investor Sequoia Fund sells Valeant stake
Pharmaceutical firm’s stock falls another 6.9% on disclosure
Shares of Valeant Pharmaceuticals International plunged Wednesday after the mutual fund that had been the troubled drugmaker’s second-largest investor sold its stake and a short-seller renewed a bearish bet on the company.
Valeant shares closed down nearly 6.9% Wednesday at $21.94 following the Sequoia Fund’s disclosure in a letter to investors issued a day earlier.
The drop also came as shortseller Andrew Left, whose Citron
Research first alleged Valeant accounting issues last October, renewed his bet that the Canada-based pharmaceutical firm’s financial fortunes would continue to fall.
“People have no confidence in the business model, and it shows in the stock price,” Left said in an interview with Real Money before referencing apocalyptic fiction. “This thing looks like The Walking Dead.”
The latest decline extended a drop that has seen Valeant shares lose nearly 92% of their value since early August, as the company denied Left’s allegations and coped with multiple investigations of its drug-pricing and distribution policies.
Sequoia Fund said the 80% fall in Valeant’s shares through June 30 “badly penalized our results,” helping produce a negative return of 13.2% return for the first half of 2016, compared with a positive 3.8% return for the S&P 500 Index. The Valeant-related drop prompted redemption requests from some of the fund’s investors.
Valeant had represented the largest position in Sequoia’s portfolio at the start of the year. The fund’s investment had ranked second behind billionaire Bill Ackman, via his Pershing Square Capital Management hedge fund.
“You may be familiar with the apocryphal Chinese curse, ‘May you live in interesting times.’ Sequoia shareholders have lived through interesting times during the past year,” the fund’s manager, Ruane, Cunniff & Goldfarb, wrote in the investor note. “We can assure you that our goal is to be much less interesting in the months and years ahead.”
Emphasizing disappointment over the results, Sequoia officially confirmed completion of a previously announced leadership change. Longtime CEO and comanager Robert Goldfarb retired at the end of March, the fund said. Goldfarb was succeeded by Ruane Cunniff CEO David Poppe, who joined other members of Sequoia’s investment committee in decisions to sell the Valeant stake and other investments.
Sequoia also sold its shares of pet-health diagnostics company Idexx Laboratories, Irelandbased drugmaker Allergan and camping and hunting retailer Cabela’s.
As part of the portfolio reshuffling, Sequoia established investment stakes in used-car company CarMax, fast-casual food chain Chipotle Mexican Grill, discount brokerage Charles Schwab and Wells Fargo, the San Franciscobased global bank.
In all, the fund trimmed its holdings from 38 stocks at the start of 2016 to 29 at midyear, the investor letter said.
Sequoia also reopened to new investors in late April, after being closed for years. The fund said it is seeking new investors directly through its transfer agent, as well as through financial services platforms, including Schwab, Vanguard, Fidelity and others.