Valeant Pharmaceuticals – need a ‘fix it” third party to come in stop the bleeding. Moreover, the current management team is stuck in the deer in headlights mode, and needs to start taking proactive steps to resolve the overhangs that our weighing down investor confidence on the street.

Valeant Pharmaceuticals

0:00regions this is econ matters its march 19 2016 and we’re going to talk about
0:05 Valeant Pharmaceuticals docked in regards to couple issues a black men and P
0:14their debt issue which is just real good take away business case study so if we
0:21look at Freeport McMoRan right
0:25they have total debt three billion and even though they have operating cash
0:35three point two billion that the reason there when there you can see that
0:46levered free cash flow just really took a hit this past year quarter and that
0:54seemed destined line in mind etcetera and that’s pretty capital-intensive
1:00business in then when their cash to get under question you get short attacks and
1:07think this stock got down to four dollars at one point somewhere around
1:11there
1:12energy energy same thing nineteen billion in total debt
1:20this cost to see his job have operating cash flow 1.3 1,000,000,000 again trying
1:33to be a new
1:35energy
1:41utility company with modern modernizing and two new age if electricity is often
1:51not

Valeant Pharmaceuticals

1:53course they got in this position by acquisition of other utility companies
1:59for the most part but then once they started you know you know in a low
2:08natural gas price environment where their cash flow was taken a hit and they
2:13were spending a massive amount of the way down to $8.80 to value they have
2:28thirty billion in debt and again a strategy of acquiring companies leverage
2:35your debt and even though they have offering cash for 2.5 foresight in so
2:44they have to get cash flow it’s just whenever you’re dead
2:49always open yourself up it looks good when times are good in school you know
2:54that you learn that

Valeant Pharmaceuticals
2:56cost of debt financing from efficiency standpoint is often better than
3:02been doing it shareholders or use cash that you should be you should if you’re
3:11running your company right should have better use of your cash than what you’re
3:16paying on debt financing and so it’s a great model the problem is that when
3:21times are good and when things turn you become Sept susceptible to shark attacks
3:28and so this is what do I faced service a shark attack in his valiant and 2698
3:40just seems like a ridiculous number and so that value creditors are putting
3:52pressure on the farm

Valeant Pharmaceuticals
3:53suitable company for new terms after it said it would miss in March 15 deadline
3:56to file its annual report that would put value risked defaulting on some thirty
4:02billion debt according to exclusive creditors may try to resent the contract
4:08terms with more stringent standards which could ultimately add more Dec
4:11haces restrictions on how well you can spend its capital and that’s not really
4:15an issue the issue is
4:18the somebody want them to go under in my mind if somebody wants to causes
4:24creditors actually a hedged where they could make more money on having them go
4:29under somebody would take them down and seen it too much on wall street where
4:36the incentives are on the wrong side in you can compare this to trucks
4:40bankruptcies a lot of negotiations were hey you know you’re gonna lose more
4:45money if I go bankrupt and cutting deal with me and so it depends on how this is
4:50aligned

Valeant Pharmaceuticals
4:52the other thing is value said its fourth-quarter earnings Tuesday it would
4:58need to filing a potential financial center in my view the 58 million
5:02incorrectly recorded revenues linked to drug strip Deerfield or services this
5:08mistake was found during internal audit I mean we’re talking 58 million ride and
5:16literally the amount of money that their capex their stock has taken a hit on is
5:23just ridiculous so it argues that management is what’s really in question
5:29here and so this brings me to what bill Ackman’s possible solution is here he’s
5:37obviously stuck at this point he thinks and he’s evaluated and probably the
5:41people invested in this runaway costs
5:46disclaim makes no sense to cut losses and then how do we stop the bleeding to
5:53give yourself a chance to have a run on the bank never on any stock and you can
5:58crush any stock and it needs to stop going down first that’s the first
6:02solution and so probably need some kind of investor confidence in I would be
6:08calling anybody that knows me a favor and hedge fund community and get them to
6:14publicly say you know I’m gonna take a stake in this its just overdone and i
6:19think that the stock has fallen too far and this makes long-term investment sure
6:27that may have problems but $26 a share but they need to do this in a public man
6:36and step in and so you know to somebody else in the solid in the business
6:40because it’s no head on down and really at this point of call options some sense
6:48if the business when you get to 26 share
6:51sure can go down to 0 but effectively something going from such a short time
6:57from 272
7:00to $27 a share and is not in doubt material stuff that long-term and I yeah
7:10you can say the politics of it
7:12drug pricing etc but just conservative with health care being such in demand
7:20and the drug business being such and demand just what it’s worth
7:24other companies even if it totally changed your pricing structure on your
7:29drugs and
7:33made some changes in the way to run the company it’s less aggressively from a
7:41pricing standpoint
7:44you gotta think the business value here at least $50 sheer so in some sense I
7:54think this is a call option for
7:57especially if you could play it you know there’s ways you could mitigate yourself
8:06you can even head yourself so somebody wanted to do me a solid they did hedge
8:10themselves so that even they could even do it so their net neutral in the stock
8:16or they have a slight upside with some hedging and they would actually come in
8:23to stop the bleeding caused those stock woodstock going down to get at least a
8:29boost it gets some of the shorts because of the short squeeze who knows what the
8:32short squeeze in this is $10 so that would be one thing that he can do get
8:38somebody to come in another investor and say publicly that
8:42but they would basically be doing him a favor saying he needs somebody to come
8:53in and fix it was obvious in management
8:55there’s no way fifty eight million dollars should even be an issue to cause
9:00of this distressing you’re stuck wondering why they overreacting or is
9:06this a great great issue where maybe they were too aggressive in their word
9:10about the legal implications of this sort of some centres concerning just
9:16incompetent management working in some of the Fortune 500 companies that have
9:20you often think people they’re much better than they are and when you sort
9:26of gas on your own you sort of start evaluating the decisions that they make
9:30from a more independent standpoint you realized that she I could have been
9:34doing that job
9:36there’s nothing special these individuals they just happen to reach
9:40places of power in the organization so the management hope interacting of this
9:48and putting a somebody on the board frankly and frankly bill Ackman sending
9:54some guys and they’ve handled this position don’t know that doesn’t give me
9:59any

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