Ackman Is Finally Done With Valeant, Takes $2.8 Billion Loss and Will Step Down From Board
March 14, 2017
By Alex Keown, BioSpace.com Breaking News Staff
A once staunch defender of the beleaguered company, Ackman said he has sold all of his shares of Valeant stock and will not stand for re-election to the company board of directors. Ackman joined Valeant’s board of directors in 2016 as part of an attempt to place the company under new guidance with a new chief executive officer, Joe Papa, who replaced former CEO Michael Pearson.
Shares of Valeant plunged more than 10 percent in pre-market trading to a low of $10.88 after news broke about Ackman dumping his investments. Ackman sold his shares for about $11 each, according to reports. Two years ago Valeant’s stock prices were valued as high as $263 per share.
At one point, Ackman owned about 10 percent of Valeant. However, as the company continued to face a crushing debt of more than $30 billion and continued fallout from possible accounting fraud related to the Valeant’s ties to the now shuttered specialty pharmacy company, Philidor Rx Services. Valeant has been under investigation by the U.S. attorney’s office in New York since last year following news of the Philidor accounting practices became known. In November, two former Valeant executives, Michael Pearson and Howard Schiller, were under investigation for their possible roles in the Philidor scandal.
Problems with Valeant and Philidor were first raised by short-selling firm Citron Research, which called the Canadian company the “pharmaceutical Enron.”
But, the end of Ackman’s three-year tenure with the company may have already been in the tea leaves. In December, Ackman dumped about 3.5 million shares of Valeant that was owned by his investment firm, Pershing Capital Management. Coupled with the most recent stock dump, Ackman and Pershing have lost approximately $4 to $5 billion on its Valeant sell-offs.
Pershing said in a statement that the funds the firm had invested in Valeant represented “1.5% to 3% of the various Pershing Square funds; however, the investment required a disproportionately large amount of time and resources,” CNBC reported.
In hindsight, Ackman said he should have first sold off his shares of Valeant in 2015 when the Philidor scandal was revealed, Business Insider reported.
Ackman first became involved with Valeant in 2014 when he and Pershing backed Valeant’s attempts to acquire Allergan. They eventually lost out to Actavis, however there was some negative fallout from the Ackman and Valeant team-up. Both Ackman and Valeant are facing a shareholder lawsuit over alleged insider trading following the failure of that deal. Ackman acquired millions of shares of Allergan before Valeant made its attempt to acquire that company.