Australian hedge fund manager John Hempton slams Bill Ackman and says he’d rather hang out with drug dealers and prostitutes then Bill Ackman.”
Just before Bill Ackman gave a presentation on Friday to defend one of his biggest investments, Valeant Pharmaceuticals, from allegations of accounting and insurance fraud, he was taunted by John Hempton, who runs a small hedge fund from Australia. It was the latest act in the hedge fund manager’s feud.
John Hempton is also very open about his distaste for Bill Ackman. When asked last week if he had ever met Ackman, he said he would prefer to “hang out with drug dealers and prostitutes.”
In an email he sent Ackman, who is one of the world’s best-known hedge fund managers, was a link to Hempton’s latest critique of the Canadian drug maker’s potential problems, one of the most detailed produced by anyone yet.
It concluded that while Valeant had probably not been artificially inflating its sales numbers, its relationship with the specialty pharmacy firm Philidor RX Services “may well cause Valeant to collapse,” taking its share price to zero.
For Ackman’s Pershing Square Capital Management hedge fund that is a scary thought. Pershing’s Valeant investment was worth as much as $5.1 billion at its peak in August, though it has now lost more than half of that. As of Oct. 31, the fund has lost 19 percent this year, largely because of Valeant, though it did gain 40.4 percent in 2014.
Hempton said in the email that he should have given Ackman an advance copy as “it would have helped you prepare for your call today.”
He signed off with “Love as always, John.”
It isn’t the first time in recent weeks that Hempton has needled Ackman.
Indeed, Hempton has been attacking Ackman since soon after Ackman launched a billion-dollar short bet against nutritional supplement company Herbalife Ltd in 2012. While Ackman has a long position in Valeant and Hempton says his fund, Bronte Capital, is betting against it, the opposite has been the case on Herbalife, with Ackman short and Hempton long.
Ackman, who declined to comment for this story, has had major battles with other investors before. He got involved in a very public spat with fellow activist investor Carl Icahn over Herbalife in January 2013.
On his call on Friday, Ackman did praise Hempton for good some good research on Valeant, before adding that he has “gotten a lot of things wrong.”
On Oct. 15, only a few days before a story from an investigative journalist, Roddy Boyd of the Southern Investigative Reporting Foundation, and a report from short seller Andrew Left of Citron Research, exposed Valeant’s ties with Philidor and questioned the company’s accounting and its behavior towards insurers, Hempton had teased Ackman in an email. In a riff off the famous exchange from the movie, The Graduate, Hempton wrote to Ackman “I just want to say one word to you. Just one word … Philidor.”
Read Citron Research here Valeant-Philador
Ackman, who has never met the Australian hedge fund manager, replied: “Not sure I understand. Perhaps you could explicate further,” according to an email released by Hempton.
Ackman conceded on Friday’s call that Valeant may have made missteps but ultimately was a fundamentally sound company that would pay fines for any wrongdoing if necessary. He said he didn’t see anything revealed so far that would result in its collapse.
Hempton, a hedge fund manager, who helped to reveal a number of accounting frauds and writes a blog at brontecapital.blogspot.com, is very open about his distaste for Ackman. When asked last week if he had ever met Ackman he said he would prefer to “hang out with drug dealers and prostitutes.”
Hempton’s recent campaign against Ackman has included questioning the way Pershing reports its performance and asking regulators to release documents about a probe it may have carried out into Pershing over Herbalife. A request that was declined.