This Is Big for Valeant Stock
These are tough times for hedge fund manager Bill Ackman of Pershing Square Capital Management after the once most coveted hedge fund lost about 15% in 2015, driven by massive losses in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) stock and Herbalife Ltd. (NYSE:HLF) shorts.
But while the ongoing war of words between Ackman and Carl Icahn (a major activist investor in Herbalife) continue, Ackman is hoping some good news emerges from the mouth of VRX CEO Michael Pearson when the company hosts its fourth-quarter earnings conference call this Tuesday.
Since being targeted by short seller Andrew Left of Citron Research, VRX stock plummeted to a 52-week low of $59.87 on March 1.
Consider that Valeant stock was trading at $263.81 on August 6, 2015.
Chart courtesy of www.StockCharts.com
There is hope among the hedge fund community that still own massive positions in VRX stock that Michael Pearson has something positive to say regarding the company’s business model and strategy going forward.
“I have been working diligently to review the business so that I can share our latest performance and outlook with shareholders,” commented Pearson in a news release. (Source: “Valeant Pharmaceuticals To Hold Conference Call On March 15, 2016,” PRNewswire, March 7, 2016.)
The reality is that there better be some sort of encouraging news to help attract some much-needed confidence to boost Valeant’s share price.
Ackman remains loyal to his 6.3% interest in VRX stock, making Pershing one of Valeant’s biggest shareholders. Yet Ackman also wants ears in the boardroom of VRX after the company’s vice chairman, Stephen Fraidin, joined the board, along with two other new members.
Let’s be clear. This is the bottom of the ninth inning for Valeant and the company needs to fend off an investigation from the Securities and Exchange Commission (SEC) and Congress.
Five Things Michael Pearson Needs to Say
- With the controversial relationship with Philidor ended, VRX must convince the stock market that its strategy for growth is valid and legitimate.
- The company should consider selling off some of its products or businesses to pare down the massive debt load that stands at just over $30.0 billion.
- Valent could look for more onboard drug distribution relationships, such as the one signed with Walgreens to sell discounted drugs. Congress wants to question VRX on its pricing and Democratic presidential hopeful Hillary Clinton has already scorned the big pharma sector on its pricing practices, so Valeant will need to be careful.
- Pearson needs to convince investors that he is the right person to take the company forward after all of his miscalculations.
- VRX needs to present a drug selling and distribution model that makes sense and offers sustainable long-term growth, rather than operating in the shadows.
If Valeant and Michael Pearson deliver on these ideas, VRX stock could really take off and reward not only Bill Ackman, but also bottom buyers in Valeant stock. I’m looking for the possibility of positive news on Tuesday with near-term weekly call options on Valeant.