In breaking news at the end of the year, Bill Ackman’s hedge fund firm Pershing Square has sold over five million shares of troubled drug maker Valeant this week. According to a December 30th SEC filing from Valeant, two Pershing Square entities sold a total of 5,027,429 shares of the pharmaceutical firm last week. Curiously, the filing claims the shares were sold to produce a “tax loss for their investors”.
Of interest, selling off five million shares reduces Pershing’s stake in the Canadian pharma to around 8.5% from 9.9%. Ackman seems to have been selling almost every day of the past week or so, which coincides with Mike Pearson’s absence.
2015 was not a good year for Valeant, as the share price dropped almost 22% after very public issues with drug pricing and unsavory distributors. Until now, Ackman has been a strong defender of Valeant, and even boosted his stake with a massive increase to the allocation in late November.
Keep in mind that Valeant cut its revenue and profit forecasts for 2015 just a few weeks ago, but the firm also claimed its problems were largely behind it, and said it anticipated double-digit sales growth next year due to higher sales volume.
Neither Ackman nor a spokesperson for Valeant were available for comment regarding Pershing’s recent sale of company stock. It has been a rough year for the firm, with the hedge fund down about 20% for the year.
Pershing Square selling Valeant shares to generate tax losses
The SEC filing notes the decision to sell the more than five million shares was to produce a tax loss for its U.S. investors: “The Reporting Persons sold Common Stock for the accounts of PS and PS II, the two onshore partnerships which are comprised of US taxable investors. PS and PS II sold, respectively, 4,904,418 and 123,011 shares of high-cost-basis Common Stock of the Issuer before year-end 2015 in order to generate a tax loss for their investors. PS International and PSH, the two offshore funds, sold no shares of the Issuer’s Common Stock.” This statement seems to contradict recent statements by Bill Ackman.
Ackman stated (not a verbatim quote):
Declines due to VRX and PAH – Much of it is due to people thinking we will be forced to sell – but we have largest permanent base of capital – we have seven yr bonds, internal capital and offering on public market – you cannot redeem more than 1/8 capital each Q for many investors. We have done well. We are prepared for snide comments from press.
Also of note, according to the filing, Pershing Square’s two off-shore portfolios with notable Valeant holdings did not sell any shares.