Valeant's crisis fuels feud between Ackman and Australian fund manager Hempton

Tue Nov 3, 2015 10:09am EST
 
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By Jennifer Ablan

NEW YORK (Reuters) - 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 a long-running feud.

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 VRX.TO 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.

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A combination file photo shows Bill Ackman (L), chief executive officer and portfolio manager of Pershing Square Capital Management, L.P., speaking in New York on May 8, 2013 and John Hempton (R), Chief Investment Officer Bronte Capital Management, posing for a photograph in Sydney on July 1, 2011. REUTERS/Files