Dive Brief:
- Valeant's stock hit a 2.5-year low recently, trading as low as $70.32 after a series of major setbacks. However, despite the weakening stock, hedge fund owner Bill Ackman increased his stake in the company from 5.7% in September to 9.9 percent.
- Although the stock passed the $90 mark on Monday on news of Ackman's investment, it is still 51% lower compared to September levels.
- Bill Ackman's fund, Pershing Square Holdings, is down 19% for the year, in part because of the decline in the value of Valeant's stock.
Dive Insight:
While most investors seek to limit exposure to Valeant, Ackman has doubled down. Not only is he executing a 'buy low' strategy, but he is also publicly defending Valeant and its CEO, Michael Pearson.
It's been a dismal stretch for Valeant, from the Philidor debacle, to allegations of insider trading and widespread criticism of its pricing practices. It doesn't seem to be getting better either---aside from the impact Ackman's aggressive investing has had on the stock price.
Already under pressure from the market, Valeant now faces Congressional questioning. Recently, U.S. Rep. Elijah Cummings (D-MD) requested interviews with a group of Valeant execs who were supposedly connected directly to Philidor. Sen. Claire McCaskill (D-MO) has also joined the scrutiny. She vowed to look more deeply into Valeant's pricing practices, as well as its relationship with Philidor.
Ackman has a good track record of recognizing opportunities others missed. Perhaps that's why the stock lifted on news of his increased investment. Regardless, Valeant needs to put in a major effort to rehabilitate its standing.