December 31, 2015 / 10:10 PM / in 2 years

Ackman's fund sells 5 million Valeant shares to generate tax loss

William Ackman, founder and CEO of hedge fund Pershing Square Capital Management, speaks during the Sohn Investment Conference in New York May 4, 2015. REUTERS/Brendan McDermid

BOSTON (Reuters) - Billionaire investor William Ackman said on Thursday he sold about 5 million shares in drug company Valeant International in order to generate a tax loss as investors in his Pershing Square Capital Management face the biggest loss in the company’s history.

Ackman’s hedge fund now owns 29.1 million shares in Valeant, or 8.5 percent of the company, down from 34.1 million shares, or 9.9 percent, according to a regulatory filing made after the market closed on Thursday, the last trading day of 2015.

Pershing Square sold shares in its two on-shore portfolios in order to generate a tax loss for investors while the two off-shore portfolios did not sell any shares, the filing said.

News that Ackman, one of Valeant’s biggest and most vocal backers, sold some of his shares comes at the tail end of a tumultuous year for the Canadian pharmaceutical company, whose share price had surged and then plummeted amid questions about its drug pricing and accounting practices.

The company, after disclosing last week that its chief executive officer, Michael Pearson, had been hospitalized with severe pneumonia, this week named a trio of company executives to take over until Pearson returns.

Ackman was not available to comment, and a company spokesman declined to say anything beyond the filing.

For Ackman, 2015 is sure to be one of his worst years ever, in part because of the heavy losses in Valeant. One of Ackman’s funds posted a 19.7 percent loss through Dec. 29. Final calculations for all of the firm’s funds have not been made.

The results mark a dramatic about face from last year’s 40 percent gain, which ranked Ackman among the hedge fund industry’s best performers. The 2014 gain was fueled mainly by an increase in drug company Allergan’s shares as Ackman pressured it to sell itself to Valeant.

Allergan sold itself to Actavis instead and in March of 2015, Ackman said he had made a sizable bet in Valeant.

But by late August, Valeant had gone from being one of Ackman’s biggest winners to being his largest loser, costing him and his investors, including state pension funds, billions in losses.

While Ackman criticized Valeant for having a public relations problem, the activist investor stuck by the company, upping his stake significantly.

Valeant’s shares closed the year down 22 percent, at $101.67, at less than half the year’s high of $260 reached in early August.

Reporting by Svea Herbst-Bayliss; Editing by Leslie Adler and Dan Grebler

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