Valeant shares plunge another 10% to all-time low after Ackman sells stake
Montreal-based drug company has lost 95% of its value in the last 2 years
Canadian drug maker Valeant Pharmaceuticals plunged to another all-time low on Tuesday after billionaire investor Bill Ackman abandoned his multi-year quest to turn around the company by selling off his entire stake, writing off almost $4 billion in the process.
The stock dropped about 10 per cent on Tuesday as investors got a chance to digest the Ackman news. The stock dropped $1.62 to $14.59 in Toronto, and by $1.22 to $10.89 US on the NYSE.
Ackman, who heads up hedge fund Pershing Square, has made a career out of identifying underperforming companies, buying up enough shares to get himself a seat on their board and then pushing for changes. He took aim at the Montreal-based drug maker in 2014 by urging it to buy rival drug company Allergan, the maker of botox.
As he has done with other companies, Ackman bought in early and rose the stock to huge gains.
Valeant was formed out of the ashes of Biovail in 2010, but quickly outgrew its small beginning through aggressive acquisitions under then CEO Michael Pearson, fuelled by cheap debt.
At one point in 2015, Valeant was the most valuable company in Canada, worth more than any oil company or big bank.
But that was before short seller Andrew Left of Citron Research calling the company's accounting a fraud.
At the same time, the company was swept up in the hysteria over drug prices, which became a major issue in the recent U.S. presidential election.
The stock, which was worth more than $260 US a share at its peak, began to crumble as the company couldn't come up with satisfying answers to explain growing questions about its financial numbers. The stock began a freefall and has yet to fully recover.
But Ackman remained a believer throughout the ordeal, so maintained his firm's position in the company all the way down, and was soon named to its board of directors.
On Monday, Pershing announced in a press release that it had sold its entire stake in the company, and announced Ackman would not stand for re-election to the company's board when his term expires.
"We wish the company and its extremely hard-working, dedicated and loyal employees great success in the future," Pershing said.
Regulatory filings suggest Pershing owned at least 18 million shares in Valeant, and paid an average of $166 US a share for them on the NYSE over the years. That suggests the fund lost at least $2.7 billion US, all told — roughly $3.6 billion Cdn.