When I told you yesterday that the stock of Valeant Pharmaceuticals International Inc. (NYSE:VRX) could hit $100 per share, I didn’t think it would happen within 24 hours. (Sometimes I even amaze myself.)
The stock fell from $148.00 at open today to as low as $98.35, losing more than 30%. [Update: As I write this, it’s traded down below $90/share, and trading may be halted.]
$16 billion – evaporated.
A lot of people just lost a lot of money. But if you’ve been reading Sure Money, you didn’t even blink.
I have been reporting how the company’s noxious business model of buying other drug companies with huge amounts of debt, firing their workers, and raising their drug prices was hitting serious resistance from politicians and investors. Recently, the company was subpoenaed by Democrats in Congress about its pricing practices. Then Hillary Clinton piled on, trying to score points with voters. This news sent the stock into a tailspin.
Then on Monday, the company announced earnings that met expectations. But that didn’t calm investors because the company said it was going to radically change its business strategy. It would no longer make large acquisitions of other drug companies in order to get its hands on drugs to raise their prices. Nor would the company, which had increased prices by an average of 66% over the last five years, depend on hiking prices in the future to boost earnings. Instead, it anticipated that future price increases would be below 10%.
In other words, the Valeant business model that had pushed its stock up to a 52-week high of $263 per share was dead.
Investors greeted this news by running for the exits. By the end of trading on Tuesday, the stock was down to $146.74.
But things were about to get much worse.
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