VRX drops 40%
How f*cksville is Ackman? Ruane, Cunniff & Goldfarb?
John Hempton is dancing.
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I think Ackman's basis is around ~$170 with a large number of $100+ strike LEAPS (probably bordering on worthless now) so he's gotta be absolutely fucked right now.
It looks like the company has officially given up the roll-up / price-increase model. I wouldn't be surprised to see Ackman get more active and push to sell the whole thing for parts because they might have a real problem paying down debt otherwise and I'm not sure that the plan to sell just noncore assets will be enough. It'll be interesting to see how this all plays out.
I have followed this saga a bit from the sidelines...
The most amazing thing to me is Sequoia's behavior throughout all this. Firstly, risking an investor lawsuit due to violation of your own concentration policies (designed to prevent the very phenomenon that eventually transpired) seems a little, how to put it, misguided. From my experience, taking these types of risks in modern day finance is hardly ever a good idea. Secondly, I just don't get how they can continue to be invested in what they themselves describe as "an aggressively-managed business that may push boundaries, but operates within the law". That, again, just appears to be short the wrong optionality.
46% now.
I'm perplexed by Sequioa too, but they may be stuck. I think there is a liquidity issue. As Sequioa is the largest shareholder, any leak of an attempt to reduce holdings would quickly spark a panic sale, and same with Pershing. I think there just isn't enough buying demand for VRX for Sequioa to reduce their position meaningfully, and a partial cover could spark the panic. Any demand would have to come from another activist or institutional investor, and I just don't think anybody is too keen on touching this with all its legal troubles and concentrated hedge fund positions. On any given day, VRX moves up/down 3-5%, to me that looks like there are liquidity issues (I'm not an equity research analyst so i don't really know). With its speculative bond rating, there could be many funds restricted from investing in it now.
Indeed, which goes to show that maybe those concentration limits were part of the fund's original policies for a reason. I'll bet you that they were there from the time when Ruane was the man in charge (may he RIP). It could be that he, unlike the current managers, appreciated precisely the sorts of problematic situations and negative externalities you might end up with when you're concentrated in the wrong thing.
Another 10% drop today. There definitely seems to be huge liquidity problems.
As I was saying in the other thread, having learned about Ackman's options trades, I am not surprised in the slightest.
BUT WHAT HAPPENED TO OUR INCREDIBLY ACCURATE PRICE FORECASTS?!?
Stock +9% today for firing their CEO, while simultaneously admitting fraud and throwing their ex-CFO (schiller) under the bus. The thing i love is that Schiller hasn't resigned from the board so it's got to be the biggest daddy hit mommy awkward board room scenarios of all time.
Also BA taking a board seat is very interesting because now if you're a Pershing LP, you've just locked yourself into Valeant for the long haul since it's going to be even tougher to sell / buy stock. Not sure how excited you are to be paying 2-20 for a single stock portfolio that you can't really sell and the business model of acquisitions / jacking prices has been ruled off the table so what's the thesis other than it's incredibly cheap and you hope it doesn't default.
Holy shit. 51% now, lol.
^ Agree with your other points but it's actually 2% and free until you get your money back. LP's won't be paying carry for a while. If as an LP you think you can make back ~15%+ from here it may be worth it to stay for another year.
RCG will be out by the end of the week if not today and I wouldn't be surprised VAC resigns from the board in the next few weeks. Mike stepping down and Ackman going on the board likely means that the company is being prepped for a breakup/outright sale.
But who and for what price wants to buy the bits and pieces?
Who exactly and at what specific price is not exactly knowable and/or something I care to discuss in this forum. B&L is an ideal PE asset and was previously run by Brent over at Allergen (the former Actavis which employs the same strategy as Valeant). There is also a not insignificant amount of PE firms that have platforms dedicated to buying orphan drugs and raising prices. Acquisition-laden strategies are par for course in pharma and sales are reported to IMS. Valeant's strategy may not have worked in the end but it is most definitely a collection of real businesses.
I read that Ackman is down 89% on VRX (which is $3.6B). ouch
He's saying that the HF dogma believes the industry is particularly acquisitive despite the 'buy drugs raise prices' business model dying.
Another Sequoia-related lawsuit... Class action by Disney employees vs their pension scheme trustee, Fidelity, as well as some Disney pension execs, accusing them of imprudently remaining invested in Sequoia. Can't find the link in the public domain yet...
Here are the links, from the earliest to the most recent: http://www.bloomberg.com/news/articles/2016-01-11/sequoia-fund-sued-ove… http://www.bloomberg.com/news/articles/2016-03-16/sequoia-firm-s-valean… http://finance.yahoo.com/news/notice-disney-current-former-employees-18…
The investigation referred to in the last link is now a class action lawsuit in the U.S. District Court for the Central District of California.
Simple As... is right, Valeant's business model is questionable at best, but underneath it are assets with real value. B&L, Salix, those were valuable companies before valeant and will become valuable companies again afterward.
it's like saying if proctor and gamble went under that gillette razorblades would be completely worthless or if apple went under nobody would want iphones.
There is probably little doubt that the Valeant constituent assets are not worthless (although there may be some uncertainty about the legal liabilities, if any). The questions are more in the realm of whether a) Valeant overpaid for these assets when it bought them (Addyi comes to mind); b) Valeant managed to destroy any value after it took over; and c) given the state of affairs, what sort of realistic bids will materialize.
fair questions.
a) wouldn't surprise me at all
b) probably, but not irreparably so. an example is B&L salespeople forced to push their customers (eye docs) through valeant's specialty pharma, perhaps the relationship was damaged, but my understanding is the products themselves are not compromised
c) if I had to guess, some PE firm will be able to get the good assets of VRX at a discount to what they would be on the private market, most likely because VRX will be a motivated seller (remember how indebted they are)
full disclosure: this is one of the few times I'm looking at this from the perspective of the employees and not an investor. I think the sales reps and the research people will be fine, but VRX's breakup value still might not mean sequoia and ackman make any substantial money on the stock.
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