Ackman's Fund Takes Massive Loss on Valeant Pharmaceuticals

Much-maligned Valeant Pharmaceuticals has lost its biggest cheerleader, as Bill Ackman announced after the bell today that he has sold his entire position in the company.

Ackman, who runs Pershing Square Capital Management, is known for taking very large stakes in companies. When things are going well, things are going REALLY well for Ackman. At one point, when Valeant was trading in the stratosphere, Pershing Square Capital Management was one of the most successful hedge funds in the world.

When the wheels come off of Ackman's investments, however, things get really ugly. According to reports, Pershing's average cost on Valeant was $196. Ackman reportedly got out of his position today at $11 per share.

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At one point, Pershing's stake in Valeant was valued at over $5 billion. Today, Ackman sold the fund's remaining 27.2 million shares for $11. Ackman said that the position was taking up too many of his fund's resources and that it was time to move on. He also acknowledged that he should have sold sooner.

Ackman had touted Valeant as a future Berkshire Hathaway, though now it appears as though the company will have a very hard time avoiding bankruptcy in the future, due to its enormous debt load.

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The wheels started to come off for Valeant when Citron Research published a report calling the company the "pharmaceutical Enron". The company was accused of using specialty pharmacies to "sustain sales of their high-priced drugs and prevent patients and insurers from switching to cheaper generic drugs".

Scrutiny and legal actions followed, and the company has been in a sustained downturn ever since. Despite hiring a new CEO, the company seems increasingly unable to turn things around, thanks largely to their large debt load. The markets have been telling the story of Valeant loud and clear - the company is going to have a very hard time staving off bankruptcy over the long-term.

Ackman obviously agrees with that assessment, as he liquidated his position in the company earlier today.

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Ackman, thanks largely to his aggressive campaign against Herbalife, is one of the most unpopular hedge fund managers in the world today.

There is no doubt that many people are cheering Pershing's estimated 95% loss in Valeant tonight.

Source: CNBC.com

Filed under: General Market News