The shares of meting again today due to the report from the Wall Street Journal that Bill Ackman of Pershing Square Capital considered selling his initial investment in the company after it was accused of accounting fraud.

Valeant’s stock was also negatively impacted by speculations that a large investor sold its position in the company as more than 30 million shares changed hands as of 11;20 AM, far larger than the average volume (as shown below). Shares are currently down 12.50% to $80.48.

Valeant drops again VRX 11/05/2015
Via S&P CapIQ

The stock price of Valeant are trading $81.95 per share down more than 10% at the time of this writing around 11:44 AM in New York. In fact, the stock declined as low as $73.32 per share earlier today.

According to the report, Ackman called Valeant CEO Michael Pearson demanded an explanation regarding Philidor and accounting issues. Pearson said he was not aware of any fraud, and the company would investigate the matter.

On the other hand, Ackman told his investment team at Pershing Square Capital that they have two options in response to the Valeant issue: “sell everything if there’s material fraud because the shares will go to zero, or buy now while the stock is a bargain. Nothing in the middle.”

Ackman decided on the second option. He bought additional two million shares of Valeant for $108 each.

Valeant needed a leader to defend its reputation

The report also indicated that Ackman was disappointed with the management’s response on the issue during a special conference call with investors. The management said, “no evidence whatsoever” of fraud and a board committee was created to review its relationship with Philidor.

The activist investor told Robert Ingram, the lead director of Valeant that Michael Pearson “can’t be CEO” if he “hides on the bunker” on the issue. According to him, Valeant needed a leader to repair its reputation including testifying before the Congress. According to him, “these are not Mike’s best skills.” Ingram told Ackman that the board was on top the situation.

In a letter to Pearson and some directors of the Board of Valeant, Ackman wrote, “Your reputation is at grave risk. Valeant has become toxic. Even we, are very concerned.”

Ackman defends Valeant investment in conference call with investors

Pershing Square was pressured by its investors regarding its investment in Valeant. Ackman decided to conduct a conference call to discuss Valeant, but the hedge fund’s CFO Nick Botta disagreed because he was concerned that “they will look like defending Valeant while they should be defending themselves.”

According to Ackman, he wanted to “give the information I’d wanted to know as an investor.”

Pershing Square’s investment partner Ali Namvar suggested sending a letter to investors. Ackman responded, “We shouldn’t hide from investors.”

During the conference call, Ackman defended his investment in Valeant, but he blamed that company’s management for its weak response to the accusations of Citron Research. According to him, the company made a “meaningful mistake” for underinvesting in public relations.

Ackman said investors and rating agencies were looking at Valeant’s debt load and leverage too simplistically. He emphasized that the company is “comfortably leveraged” and investors should focus on its ability to service debt.

He also criticized the short-selling strategy of Andrew Left from Citron Research. Ackman said Left disclosed his short position on Valeant but made it as a research report.

Left tweeted that Valeant’s stock price has a better chance of going zero than Herbalife, and threatened to release another bombshell against the company. Ackman said, “He’s irrelevant.” Left responded, “The market thinks differently.”

Left did not offer new allegations against Valeant on Monday, but stood by his criticisms and maintained his skepticism on the future of the stock.