Hello monkeys,
As you guys have read on the news, Bill Ackman screwed up this investment real, real bad. Here's a little background on how he screwed up real, real bad, and how this serves a lesson as all of us.
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Ackman's Pershing Square bought Valeant's shares for about $196 per share in February 2015. Stock prices show that Valeant's shares actually reached a peak high of $257 per share in July 2015; Pershing Square would've made 59% returns if he sold the share at this peak.
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But it just went downwards after this peak; the firm started to hike the price of a number of drugs it acquired Martin Shkreli-style.
The Canadian drugmaker first came under fire for allegations of using a network of specialty pharmacies to sustain sales of their high-priced drugs and prevent patients and insurers from switching to cheaper generic drugs. Short-selling firm Citron Research subsequently published a note calling Valeant the "pharmaceutical Enron."
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As we all know, it reached bottom lows of $11 recently, and Ackman finally got out, posting a $4.1 billion loss. To add insult to injury, Ackman spent nearly $435 million to close his put options on the firm!
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Even more salt on the wound: VRX short sellers were profitable every year after Bill Ackman’s entry into the stock, eventually earning a 343.45% return on their average short position of $801 million.
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What now? Pershing Square said in a statement that Ackman would remain on the board, but would not stand for re-election, eventually stepping down from the board.
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Doesn't stop there, Pershing Square is still responsible for Valeant's settlements!
On Wednesday, California US District Judge David Carter permitted Allergan shareholders to pursue their case against Ackman’s Pershing Square and Valeant as a class. The shareholders say that they were cheated out of gains by selling their shares in 2014 while Pershing acquired a nearly 10 percent stake in Allergan to assist Valeant’s now-failed takeover bid of Allergan.Last month Pershing and Valeant agreed to split $10 million in legal costs. Also as part of the agreement, Valeant agreed to pay 60 percent of any settlement, and Pershing agreed to fork over the rest.
What do you monkeys think? Should he have exited his position sometime earlier? I definitely believe that this damage was avoidable since Valeant was really showing signs of a bad company due to the earlier lawsuits. Instead, Ackman's hedge fund had to endure a record loss.
Sources:
Here's how much Valeant short sellers have been killing it ever since Bill Ackman got in the stock
Ackman has sold out of Valeant, will step down from board
Bill Ackman can’t escape Valeant lawsuit
Bill Ackman Lost $7.7 Million Per Day on Valeant Stock
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