Shares sold out by former CEO
Bill Ackman is a board member of Valeant Pharmaceuticals (VRX), Canadian Pacific Railway (CP), and Howard Hughes (HHC). When asked about the recent sale of Valent shares by former Valeant CEO J. Michael Pearson, Bill Ackman said that Pearson was forced to sell the share due to tax issues.
Between June 30 and July 5, Pearson sold five million shares of the company’s stock. He has now offloaded nearly $96.8 million worth in shares.
About this, Pearson stated that “I continue to believe in Valeant, Joe, and the management team. While I trimmed my ownership position for personal reasons…I plan on holding my remaining shares until the company recovers and returns to being traded on fundamentals.”
The stock provided a very poor performance over the past year, trading at $257.5 on July 1, 2015, and on July 18, 2016, trading at $23.50. This clearly indicates that the stock has fallen by nearly 91% in the past year, whereas the market (QQQ) (VFINX) returned 3% during that period. The current price-to-earnings ratio of Valeant’s stock is -10.61x.
In August 2015, the company boosted the prices of two of its major drugs by 212% and 525%, respectively. Then Citron Research, a California-based short-selling research firm, alleged that Valeant had committed accounting fraud. These issues have continued to put downward pressure on the stock.
Bill Ackman believes that the company’s core business is strong, as well as its underlying franchises, and that Valeant simply is suffering from uncertainty. It has $10 billion in non-core assets, which will likely help the company increase its valuations.
Carl Icahn has an opposite stance for Valeant Pharmaceuticals. Icahn recently said, “I don’t know enough about it to say I would short it, but I definitely would not buy it.” (For more on this, check out “Carl Icahn Wouldn’t Invest in Valeant, although Bill Ackman Holds $567 Million in It.”)
By comparison, David Maris of Wells Fargo (WFC), believes this selling is a “negative sign” for the company.
In the next part of this series, we’ll analyze Bill Ackman’s view on Mondelez (MDLZ).