Published: Wed, March 15, 2017
Markets | By Erika Turner

Valeant Pharmaceuticals: What Was Bill Ackman Thinking?

Valeant Pharmaceuticals: What Was Bill Ackman Thinking?

His firm, Pershing Square Capital Management, sold its entire stake in Valeant, capping its losses on that investment at about $4 billion.

Last summer, when Valeant Pharmaceuticals was trading at about $20 per share, I had an analyst at an investment firm tell me the stock had bottomed - I was a little more than skeptical at the time, and expressed my pessimistic view that the company still had further to fall.

Valeant Pharmaceuticals' shares were down again Tuesday (10.3% to $10.86). Valeant stock has fallen 24% this year and has lost. The stock has plunged more than 82% during the last 12 months. The long decline of the stock price has tarnished Ackman's reputation as an investor and wreaked havoc on his portfolio.

By September 2015, Valeant stock stopped climbing and began its descent - by mid-November, the stock would be down to $75 per share. Valeant and Ackman are now facing a shareholder lawsuit over alleged insider trading involving the failed deal for Allergan.

Pershing attributed its decision to sell to the "disproportionately large amount of time and resources" dedicated to maintaining its stake in Valeant.

Ackman's concentrated bets and brash declarations - he once said Valeant would hit $448 a share by 2019 - have made him a polarizing figure on Wall Street with some investors keen to take the opposing view from him. (NYSE:VRX) shares have moved -11.1470%.

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The average price paid by Pershing was $166.11 per share for the stock at Valeant that was purchased outright, not taking into account proceeds it received for stock sales that were subsequent to that or transactions involving options. The difference between the expected and actual EPS was $0.05/share, which represents an Earnings surprise of 4.1%.

Ackman bought eight stocks of Chipotle Mexican Grill recently, in February, with a value of $5.9 billion, according to Gurufocus. "We made one very big mistake taking a passive position in Valeant", he told CNBC previous year. Kistler Tiffany Companies LLC now owns 5,567 shares of the specialty pharmaceutical company's stock valued at $137,000 after buying an additional 2,719 shares during the last quarter. Analysts mean target price for Karyopharm Therapeutics Inc.

The hedge exited J C Penney Company Inc (NYSE:JCP) in 2013 and resigned from its board after two-year battle with the management.

On Dec 16 Valeant Pharmaceuticals International, Inc.

Valeant cuts ties with mail-order pharmacy company Philidor, after a report from Citron Research accused the company of "fraud."

He played a significantly more hands-on role than other investors, including activist fund ValueAct, which had helped build the company by recruiting Pearson to the top job years ago.

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