Valeant playing aggressive accounting games: Chanos
Insight to why so many are negative on Valeant, with Jim Chanos, Kynikos Associates founder & president. “A roll up is a roll up,” he explains.
we’re short because it’s a rollup. and rollups present a unique set of problems. rollups are usually accounting-driven, and we certainly think that’s the case in valeant. we think valeant is playing aggressive accounting games when they buy companies, write down the assets, and also engaged in what we call spring-loading, a term your friend herb greenberg and i coined way back when, and finally, the only people more negative about valeant maybe more than me are valeant insiders. there have been six executives who left, senior executives, in the past 15 months and a lot of insider selling, including the executive vice president of corporate and business development, who sold stock yesterday. i mean, it’s — there seems to be not a lot of confidence from inside the valeant executive suite here. and that’s putting aside the deal dynamics which is a whole separate story. for us, and we were short before the announcement, a rollup is a rollup. and you have to analyze the company not growing organically and has to deliver value by doing bigger and bigger acquisitions, and usually the companies do an acquisition too far. he put out a target, the ceo, saying we’ll be 150 billion. you can’t put out that target. it’s one thing if you say we’re going to acquire good companies, solid companies, but to look at the end game in terms of 9 size of your company, i found that troubling, and tyco. and they had to do deals. the other problem with valeant — bigger deals, too. — if they don’t get allergan, they may have to do a deal underneath allergan, because they’re going to anniversary the bausch & lomb acquisition in august, and then you’ll see real apples-to-apples, and that’s why rollups have to do deals that are accounting-driven, because to get growth you have to do a bigger deal than the year
Master of short selling talks art market
Discussing the action in the art market, and why he’s short Sotheby’s, with Jim Chanos, Kynikos Associates founder & president. “There’s always someone smart on the other side of a trade,” he says.