As You Made Money, This Activist Investor Lost $400MM in 24 Hours

I’m hearing from many of you today that you just made serious money on my Valeant (VRX) prediction.

That’s gratifying; thank you for sharing your successes.

And there will be a lot more where that came from – plus more specific money-making recommendations. Hang around.

Meanwhile, yesterday, activist investor Bill Ackman was just doing what macho hedge fund guys who think they are smarter than everybody else are supposed to do when he bought two million more shares of VRX stock on Wednesday when it was selling off by 40%.

Whoops!

A mere 24 hours later, VRX is back under $100/share and Ackman is down another $400 million after Canadian regulators announced they are keeping a close eye on the pharmaceutical company and Wall Street analysts are raising more questions about the company’s sales prices and disclosures.

While the Quebec securities regulator hasn’t opened a formal investigation on VRX yet, it expressed concern about the issues raised by short seller Citron Research. Citron’s report raised serious questions about how VRX sells its drugs and whether all of the sales it reports are legitimate. The report accelerated the sharp selloff in VRX shares that began a few weeks ago, as I predicted, when politicians began focusing on the company’s egregious drug price increases.

Now I have another prediction.

If Canadian regulators are sniffing around, the Americans can’t be far behind. I would not be surprised to see the SEC, FDA, Justice Department and various state attorney generals open investigations into various aspects of the company’s business. If that were to happen. The stock would come under further pressure.

That’s not Valeant’s only problem. Bond investors are also bailing. JP Morgan has downgraded the company’s bonds and scolded management for lousy disclosure of its sales practices. The bigger problem from a credit perspective is that today’s VRX is no longer yesterday’s VRX. After last Monday’s earnings call, the company’s previously noxious and predatory business model has completely changed. Now the question is whether a kinder, gentler VRX can pay the debt incurred by its dark twin who was born gobbling up other companies with tens of billions of debt and firing their workers and hiking their drug prices. Now that the stock price has been cut by 60%, the company’s credit metrics have been drastically altered. If the stock keeps dropping, which I expect, the company’s banks may start to get worried (they likely already are).

Let’s watch it unfold together.

By the way, Bill Ackman reminds a lot of people of some of the characters on the Netflix show House of Cards. Now you know why.

6 Responses to “As You Made Money, This Activist Investor Lost $400MM in 24 Hours”

  1. Congratulations!!!…Unfortunately I was not able to partake in the VRX success as my portfolio buying power was tied up in losses from one of your earlier suggestions to “immediately” sell short BHP and RIO. I notice you haven’t had anything at all to say about that position or what to do at this point or any point in the foreseeable future. Guess you’re to busy patting your self on the back with your recent success and short term memory loss for those of us left holding the bag.

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