Billionaire hedge fund manager Bill Ackman Lost About $1 Billion Today Following Valeant’s 49% Drop.
Billionaire hedge fund manager Bill Ackman’s Pershing Square Capital Management LP said it will take a much larger role at Valeant Pharmaceuticals International Inc., after losing about $1 billion in a single day following the drugmaker’s 49 percent stock drop Tuesday.
“We are going to take a much more proactive role at the company to protect and maximize the value of our investment,” Ackman said in a letter Tuesday. Pershing owns 9 percent of Valeant shares, according to a March 9 regulatory filing. He said that investors have lost “total confidence in the company,” contributing to the stock drop. Ackman’s firm recently added a representative to Valeant’s board.
Valeant shares plunged Tuesday morning in their worst day ever after the company cut its 2016 forecast, reported a weak fourth quarter and said it risked breaching some of its debt agreements if it can’t file its annual report in time. Chief Executive Officer Mike Pearson has promised to restore confidence in the drugmaker with investors.
Yet the company’s stock losses — the shares are down 86 percent since their August peak of $262.52 — have cost Ackman and other large holders billions of dollars in paper losses. Ackman’s calculated losses assume the investors still own the number of shares listed in their most recent regulatory filings.
Pershing Square, based in New York, often buys large stakes in companies that it sees as undervalued, and then sometimes pushes for changes by the management or board to boost returns. In October 2014, a public fund called Pershing Square Holdings Ltd. began trading in Amsterdam with the same portfolio as the hedge fund; it’s stock was down 12 percent on Tuesday.
Ackman also said he believed Valeant would be successful in getting a waiver from creditors to avoid violating its debt agreements, since it will be late filing its annual report. Valeant said it must file its 10-K by March 30 to avoid triggering cross-defaults that would restrict it from being able to further tap its credit line. It won’t be able to meet that deadline and will begin asking lenders next week to amend the agreements.
“While we believe that it is highly likely that the banks will provide a waiver, uncertainty about the potential for a default creates enormous investor fear,” Ackman said.
Last week, Valeant announced it was adding three new board members, including Pershing Vice Chairman Steve Fraidin. Ackman said he believed the company was undervalued, and was worth “multiples” more than its current price.
“Getting to those values, however, will require restoration of shareholder confidence in the management and governance of the company,” Ackman said.
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