Why Lemelson Capital Is Short On Ligand Pharmaceuticals

Rev. Emmanuel Lemelson is the Chief Investment Officer of Lemelson Capital Management, and investment firm that is short in Ligand Pharmaceuticals Inc. LGND.

Lemelson recently joined Benzinga’s #PreMarket Prep to talk about why he thinks anyone who is considering investing in Ligand should take a close look at the company's GAAP EPS.

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He explained that the company has developed a pattern of doing a pre-earnings announcement of non-GAAP earnings.

"There’s a place for non-GAAP," he said. "But I don’t think that place is Ligand."


He said that he feels the company's most recent pre-earnings announcement is to cloak the stock option awards to management and an extremely expensive bond offering with about 18.5 percent the cost of their debt.

The GAAP EPS are the earnings actually going to the shareholders, Lemelson said, and that’s extremely finite.

"So the suggestion that you have these non-GAAP EPS -- shareholders are never going to see that money. And I think that's important to understand if you're a Ligand shareholder," he said.

Not All Management Teams Are Equal

But reporting non-GAAP earnings isn't unique, Lemelson said. He said that Berkshire Hathaway Inc. (NYSE: BRK-A) uses non-GAAP earnings, but not in a way that is relevent to the way the company is functioning. The company isn't trying to hide anything like stock option awards or real cost of debt, Lemelson explained. 

"So there's a spectrum of companies out there in the way that they report," he said. "And not all management teams are equal."

Lemelson also talked about American Apparel Inc APP.

Check out his full interview here:

Don’t forget to tune in to Benzinga’s #PreMarket Prep Monday-Friday 8-9:45 a.m. ET all of the premarket data and info you need for your trading day.

Posted In: Lemelson Capital ManagementRev. Emmanuel LemelsonShort IdeasTrading IdeasInterview

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