BOSTON, Oct 30 (Reuters) - Hedge fund billionaire William Ackman spent nearly four hours on Friday trying to convince the world that drug maker Valeant was a good buy but it was short-seller Andrew Left’s tweet promising fresh allegations about the Canadian company that got noticed.
By the end of trading, Valeant’s stock price had tumbled nearly 16 percent to $93.81, wiping $6.2 billion off its market capitalization and taking Ackman’s own losses on the company to roughly $2 billion.
Left’s accusation last week that Valeant was using its ties with specialty pharmacy groups to artificially boost its sales, a charge the company has denied, has sent the stock into a tailspin and is turning 2015 into a very difficult year for prominent hedge funds such as Ackman’s Pershing Square Capital Management and John Paulson’s Paulson & Co.
Left, who runs Citron Research from Los Angeles, said he would update his Valeant allegations on Monday, pledging that the story would be “dirtier than anyone has reported.”
Ackman, meanwhile, toiled in vain in the company’s defense in a specially convened conference call.
The New York-based hedge fund manager blamed bad public relations and naive investors for Valeant’s predicament saying the company should have responded more vigorously to concerns about its ties to specialty pharmacies.
Ackman, whose fund is the second-largest investor in Valeant, pledged to stand by the company’s chief executive officer, Michael Pearson, saying “stuff happens” even with reputable companies.
Left, however, is unconvinced.
“The market is telling you ‘we don’t know what is true and what is not true and we don’t want to play anymore’,” he said, shortly before heading out with his young daughter for some early Halloween celebrations.
Left said he first started digging into Valeant just a few weeks ago when Martin Shkreli, the 32-year old founder of two drug companies, was vilified after raising the price of a recently-purchased AIDS and cancer drug, Daraprim, from $13.50 to $750 a tablet.
The short-seller knew of Valeant from watching business news channel CNBC and its sharp stock price gain prompted him to spend a few hours digging on the Internet, research that formed the basis for the report he issued last week.
Left, who profits from betting his own money that company shares will fall, has declined to say when exactly he bet against Valeant or how big his position is. He has said only that it was made weeks ago.
Ackman has criticized him for failing to provide these details, noting that he was far more candid on his own short bet against nutrition firm Herbalife, which he put on nearly three years ago and is hurting him as the stock is up 48.65 percent this year alone.
But so far it seems that Left and other short-sellers including Kynikos Associates Jim Chanos and Australian hedge fund manager John Hempton are getting rich on Valeant’s sharp loss as the stock has tumbled 47 percent in the last month.
Left tweeted on Friday that Valeant shares had a better chance of going to zero than Herbalife.
Indeed, the Valeant slide could translate into deep pain for smaller hedge funds that have a few million dollars under management but own enough Valeant stock to make up about one fifth of their portfolios. Glenn Greenberg’s $3.3 billion Brave Warrior, for example has invested 36 percent of his assets in Valeant.
Ackman’s fund was off roughly 16 percent for the year before adding in today’s losses, a sharp reversal from last year’s 40 percent gain.
Left said he did not take any pleasure in seeing smaller funds suffer but said they could have taken corrective action long ago after the stock had surged. “I hope these small funds aren’t mad at me,” he said. (Additional reporting by Caroline Humer and Michael Flaherty in New York. Editing by Carmel Crimmins and Alan Crosby)