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

Tue Nov 3, 2015 9:40am EST
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By Jennifer Ablan

NEW YORK Nov 3 (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 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.

Hempton said in the email that he should have given Ackman an advance copy as "it would have helped you prepare for your call today."

He signed off with "Love as always, John."

It isn't the first time in recent weeks that Hempton has needled Ackman.

Indeed, Hempton has been attacking Ackman since soon after Ackman launched a billion-dollar short bet against nutritional supplement company Herbalife Ltd in 2012. While Ackman has a long position in Valeant and Hempton says his fund, Bronte Capital, is betting against it, the opposite has been the case on Herbalife, with Ackman short and Hempton long.

In the world of finance, the contrast between the two almost couldn't be greater. The Adelaide University-educated Hempton, 48, runs less than $200 million of funds from a tiny office he sometimes sleeps in near Sydney's Bondi Beach. He looks more like the Australian public servant he once was - with large round spectacles, while sweaters and jeans are as often part of his garb as collared shirts and ties.   Continued...