Valeant Pharmaceuticals halted trading in pre-market hours for news which we are awaiting and will update when it comes in.
Analysts at Rodman & Renshaw have also weighed in this AM (pre-big news announcement) stating:
Default risk may be manageable. From our perspective, the most substantial risk is that of debt default. It is important to note that Valeant has not missed any bond payments and that the primary rationale
for an event of default is related to the covenants in Valeant’s debt agreements that pertain to the filing of the firm’s financial statements. Since Valeant has yet to file its 10-K, it now has a rapidly ticking clockin which to avoid default. We believe that if Valeant can: a) come to terms with its creditors on a timeline for the filing of its 2015 10- K and 1Q 2016 10-Q; and b) file its financial statements in line with this compromise, any near-term risk of default should be mitigated. We note that it is not in creditors’ best interest to force the company into default. Accordingly, therefore, if the firm can demonstrate that it would be able to file its financial statements near term, we believe a compromise can be struck. We reiterate our Buy rating and 12-month price target of $118 on VRX, while noting that an event of default would clearly have material consequences to our thesis and rating.GrizzlyRock: Long Thesis For This European Travel Company [Q1 Letter]
GrizzlyRock Value Partners was up 16.6% for the first quarter, compared to the S&P 500's 5.77% gain and the Russell 2000's 12.44% return. GrizzlyRock's long return was 22.3% gross, while its short return was -2.9% gross. Compared to the Russell 2000, the fund's long portfolio delivered alpha of 10.8%, while its short portfolio delivered alpha Read More
UPDATE 9:AM EST:
Valeant Announces CEO Succession Plan And Changes To Board Of Directors; Provides Accounting And Financial Reporting Update -Dow Jones
Also, UBS has dropped coverage, they have thrown in the towel stating:
Suspending converge due to lack of visibility in financials We are suspending coverage for VRX given the lack of transparency in the company’s financials and uncertainty over the timeline of that visibility. We believe that under the current circumstances, it is not practical to forecast the company’s financial results and maintain an investment opinion. Therefore, we are suspending coverage of Valeant. Valuation: Suspending coverage Our previous rating and forecasts for VRX can no longer be relied upon. Our prior PT of $213 was based on a P/E multiple of ~16x our prior 2016E EPS estimate of $13.50.
Stay tuned for what could be another wild day for the company
Additionally, there have been two downgrades of the company this morning.
We are downgrading VRX to Underperform from Neutral, and lowering our PT to $18 from $70. After careful consideration of comments from the earnings call, we view 3-year growth forecasts as unreliable and see the business as contracting. We also expect erosion of the company’s topline to exceed the exclusivity risk guided by Valeant due to heavier rebating and divestitures required for debt repayment.
We are downgrading shares of VRX to EW and lowering price target to $34; our downgrade reflects the greater uncertainties facing VRX over the next 12-18 months. Despite recent challenges facing VRX, we felt it had solutions to address them, namely the relationship with Walgreens to replace its troubled/controversial relationship with Philidor. There were unknowns around profitability of scripts through Walgreens and even though initial volume trends were encouraging, the magnitude of the cut to VRX’s outlook for 2016 came as a surprise.