Valeant Pharmaceuticals Intl Inc (VRX) Falls as Ackman Cuts Stake

Valeant Pharmaceuticals Intl Inc (VRX) Falls as Ackman Cuts Stake
Chart via S&P CapIQ

The shares of Valeant Pharmaceuticals are trading lower today primarily on the report that Bill Ackman of Pershing Square Capital Management reduced his stake in the company.

The stock price of the Canadian pharmaceutical company is down more than 3% to $97.87 per share at the time of this writing around 3:15 in the afternoon in New York.

Ackman sold 5 million shares of Valeant Pharmaceuticals

In a regulatory filing with the Securities and Exchange Commission (SEC), Mr. Ackmans firm disclosed that it sold five million shares of Valeant Pharmaceuticals “to generate tax loss for investors.”

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According to the Wall Street Journal, Pershing Square Capital Management sold its shares in the company between December 24 and December 31 at prices between $100.95 and $114.94 per share.

Based on its filing, Pershing Square Capital Management currently owns 29,091,122 shares (including 16,591,122 shares of commons, and 12,500,000 shares of common stock underlying over-the-counter American-style call options), which represent 8.5% of the outstanding shares of Valeant Pharmaceuticals. The hedge fund previously owned 9.9% stake in the company.

Pershing Capital’s returns hurt by Valeant Pharmaceuticals

The problems confronting Valeant Pharmaceuticals hurt Ackman’s returns. Pershing Square Holdings, the publicly-traded firm of the activist investor, declined 19.7% as of December 29.

Valeant Pharmaceuticals lost more than 31% of stock value over the past year. The company’s stock price dropped from its highest level of $263.81 per share to as low as $69.33 per share over the past 52 weeks.

The shares of the Canadian pharmaceuticals company was primarily hurt by the allegations of short-seller Andrew Left of Citron Research that it was using pharmacies such as Philidor RX Services to create fraudulent sales and inflate its growth rate.
The short-seller described Valeant Pharmaceuticals as the next Enron of the pharmaceuticals industry and stated that the stock has a better chance of going zero than Herbalife.

Despite the allegations, Ackman remained a strong supporter of the Canadian pharmaceutical company. During its most difficult times, Ackman increased its stake by two million shares and held conference calls with investors to defend his investment in Valeant Pharmaceuticals and criticized Citron Research’s short-selling strategy.

The pharmaceutical company recently announced that its CEO Michael Pearson is on a medical leave of absence due to a severe case of pneumonia. A group of senior executives is taking care of his responsibilities.

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