Bill Ackman To Valeant's CEO: Your Reputation Is At Grave Risk
- Shares of Valeant Pharmaceuticals Intl Inc (NYSE: VRX) fell 6 percent on Wednesday and remain within striking distance of its 52-week low of $88.50.
- Activist investor and Valeant shareholder Bill Ackman wrote a letter to Valeant's CEO saying his reputation is "at grave risk" and the company has "become toxic."
- The Wall Street Journal noted Ackman's hedge fund has lost nearly $2 billion.
Investors have every right to remain concerned over Citron Research's allegations that Valeant is the Enron of pharmaceuticals through the creation of a network of undisclosed entities in order to alter financial results.
One of the very concerns investors is Bill Ackman whose hedge fund, Pershing Square, has already lost almost $2 billion, according to The Wall Street Journal. Ackman wrote a letter on Tuesday to Valeant CEO Mike Pearson and said his "reputation is at grave risk" and the company has "become toxic." He added that "even we are very concerned."
WSJ noted that Pershing Square's assets has fallen by about $4 billion in value since Valeant's stock peaked in August. Pershing Square's four funds have now lost 16 percent this year, after returning 40 percent last year.
Ackman told Valeant that "management needs to come clean" and to hold a press conference immediately in order to "lay out everything you know." The company ultimately decided against holding a press conference, a move that irked Ackman who then phoned the company's lead director, Robert Ingram, and said "if Mike [Pearson] hides in the bunker on this, he can't be CEO."
Ackman bought a 5.7 percent stake in Valeant, valued at around $3.8 billion, last March. At that time, the stake represented around 20 percent of Pershing Square's total portfolio. He added two million shares to the portfolio on October 21 at the height of the accusation against the company as there were only two options available: "sell everything if there's material fraud because the shares will go to zero, or buy now while the stock is a bargain."
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.