Valeant doesn’t seem to understand the rule of law. They just withdrew guidance last night, delayed their 10k and it was revealed today that they are now under the formal investigation of the SEC which they knew about in Q4. The lack of timely disclosure of material information such as the SEC investigation is abhorrent. Then tonight we learn the company may have violated Reg FD when this item was reported by Reuters:
The company has told a number of large investors that it is optimistic about its 2016 financial guidance, according to people familiar with the matter.
Here is the definition of Reg FD in case you wanted to know:
“Regulation Fair Disclosure, also commonly referred to as Regulation FD or Reg FD, is a regulation that was promulgated by the U.S. Securities and Exchange Commission (SEC) in August 2000. The rule mandates that all publicly traded companies must disclose material information to all investors at the same time.”
I know personally that Valeant has most likely been violating Reg FD for years and that is why it became such a hedge fund hotel and darling. When I was attending an idea dinner in Boston around 2012 a large hedge fund pitched the stock as an idea. It sounded like a perfect pitch. His conclusion was “the street has x estimates for earnings but the numbers are more like 2x.” I asked him how he knew that and he responded with a wink and a nod and said trust me. Of course he did not disclose that Pearson told him the numbers but having lived through the 2000 tech debacle I had witnessed this nonsense way before Reg FD was established. Basically I am guessing the routine was that Pearson would whisper sweet nothings into the ears of these HFs and they would feel special like they were getting an edge on others. I am sure Pearson would say it in such a way that they were sure they cleverly dragged it out of him because they were so smart. However, what they all have failed to realize is that Pearson is a psychopath in my opinion and as a psychopath he is a phenomenal con artist. He was making a number of large HF’s all feel special. For awhile he delivered them sweet music.
Bill Ackman is Pearson’s largest and best mark. Bill you have been conned. You are a dupe and your clients are going to get royally screwed unless you flush this down the toilet. Tonight I am sure you got a call from Team Pearson and you were told that the “2016 guidance may be more optimistic than what was in the press release.” So the question becomes why would you trust a guy who likely just broke the law? Do you understand the flawed logic here Bill? The bottom line is the numbers can not be trusted here and are likely massively fraudulent. I find it utterly incomprehensible that so many HF’s did not know this was a bullshit roll up from the get go. Basically these HF’s assigned a growth multiple to a company that bought low growth drug companies with massive amounts of debt and stock, pillaged R&D and then jacked up the prices on we the people and the government. How long did you guys think this model was sustainable?
I shorted more today as it broke the November lows and doubled my position. We may try to back test that level tomorrow but the chart says this is done and negative reflectivity will feed on itself. Let us not forget Moody’s said, before the disclosure of the SEC investigation today, that they may downgrade the debt or that Bill sold 9.6 million OTC 1/2017 Puts with a strike of $60. My new target is $0-$20. Many large sharks on Wall Street smell the blood and understand negative reflectivity. If the $70 level can not be retaken with authority tomorrow all hope will be lost for the remaining holders of this over levered low growth drug company. Below is the full Reuters News Article:
Shares in Valeant Pharmaceuticals International Inc fell as much as 21 percent on Monday after the drugmaker revealed that it was under investigation by the U.S. Securities and Exchange Commission.
“Valeant confirms that it has several ongoing investigations, including investigations by the U.S. Attorney’s Offices for Massachusetts and the Southern District of New York, the SEC, and Congress,” said Laurie Little, a Valeant spokeswoman.
She said the company confirmed that it “received a subpoena from the SEC in the fourth quarter of 2015 and, in the normal course, would have included this disclosure in its 2015 10-K. We do not have further detail to provide at this time.”
The company’s U.S.-traded shares fell 18.4 percent to close at $65.80 per share.
The SEC probe is separate from an existing investigation into a company purchased last year by Valeant, Salix Pharmaceuticals Ltd, according to a person familiar with the matter.
News of the probe came a day after the Canadian company canceled the release of fourth-quarter earnings, withdrew 2016 financial guidance and said its chief executive had returned from medical leave.
Valeant then attempted to hold a conference call with sell side analysts but later backed out after news of the call was leaked to members of the press, according to people familiar with the matter.
News that the call had been scheduled was first reported by Bloomberg. The cancellation was first reported by CNBC.
Valeant is still holding one-on-one conversations with sell-side analysts and major investors, the people said.
The company has told a number of large investors that it is optimistic about its 2016 financial guidance, according to people familiar with the matter.
It said that it withdrew guidance as a precautionary measure and that investors should not assume that the updated guidance will be significantly lower than what was previously announced, the people said.
Valeant does not expect to file the annual report on its 10-K within the 15-day extension period since it has not yet determined if any restatements are required, the company said in a filing. (1.usa.gov/1Tj2tmX)
In December, Valeant provided 2016 adjusted earnings guidance of between $13.25 and $13.75 per share.
“At this point, investor anxiety is primarily focused on the upcoming earnings report and 10-K,” said Umer Raffat, an equity analyst at Evercore. “They just want to be absolutely sure that it won’t contain any more major bad news.”
The stock has been see-sawing for the past month, often gaining or losing 5 percent or more as speculation has swirled about its future.
The timing of CEO Pearson’s return from severe pneumonia had been unknown, and there was speculation on Wall Street on whether he would return at all.
The full outcome of its board investigation into the relationship with pharmacy Philidor RX Services, now terminated, remained unknown.
Investors have questioned how the company will regain sales of many dermatological products that Philidor sold, and do not know the terms of a new distribution agreement with Walgreens Boots Alliance Inc.
Last week, the company said it would restate earnings to reflect preliminary findings from the board review, adding that it should have accounted for $58 million of revenue later than it did.
Moody’s Investors Service placed the ratings of Valeant under review for downgrade, reflecting concerns that the company’s operating performance is weaker than its expectations. (bit.ly/1T4m6Pl)
(Reporting by Carl O’Donnell in New York and Ankur Banerjee in Bengaluru; additional reporting by Caroline Humer in New York; Editing by Jeffrey Benkoe, Maju Samuel David Gregorio and Sunil Nair)
If you enjoy the content at iBankCoin, please follow us on Twitter
I’m very very concerned about Valeant. Unfortunately, I’m busy & don’t have time to read up on it.
Survey: What are your first few clicks of the day?
eg:
http://www.kitco.com/market/
http://finviz.com/futures.ashx
http://ibankcoin.com/
http://www.tfmetalsreport.com/podcast/7473/discussion-ivan-bebek-auryn-resources
You just called Pearson a psychopath .When he is in court suing
you, how will he prove he’s not.
Blue do you think SUNE is a similar scam?
Like it. The company is a shitshow, and the more they get investigated, the more Wild Bill is going to understand the Greek dramatic concept of the tragic antihero.
Great call Bluestar.
You have to have cojones to step up to these clowns. Well done sir.
Obviously, the free market needs to do the job the regulators and courts should be doing. They will be late in acting, if they act at all. Justice needs incentives it seems. Glad to see you serving it up man.
superpostron,
have not done the work.
DeTocz,
Thanks,
I am not worried about the company. I was trolled on twitter by a few company shills. They are silent now. We are at the stage where they have so many legal issues and problems that messing with a financial blogger is low on the priority list. It came out today that there request to the SEC to investigate citron backfired on them.
Ah – I see where you’re coming from Blue.
Citron were shorting valeant so they tried to put the dogs on citron but got blown out.
This is a good example of shorting stocks working for the benefit of the market as a whole. The idea that short-sellers are evil and must he stopped (a la China) has proven itself to be an erroneous concept. The bear and the short are essential for the health of the market to continue. The kind of shady practices that occur in a market with no downside could end up in a horrific histories book. It is human nature that we are dealing with here after all.
Ask yourself, am I a billionaire or multi-millionaire?
If not, ask yourself, do I know some self-made billionaires or multi millionaires?
If so, ask yourself, does it make more sense to follow the advice of some self-made billionaires or multi millionaires or to follow the advice of others?
Just a guess, but I imagine Jimmy Bow-tie is a self-made multi-millionaire if not a billionaire.
Looks like Bloomberg is on to this issue as well.
http://www.bloomberg.com/news/articles/2016-03-07/valeant-ceo-s-calls-with-analysts-raise-hackles-over-disclosure?cmpid=yhoo.headline
Nailed this one Blue. Congratulations.
Thanks all. You win some and you lose some.