As stock crashed, Valeant's largest shareholder reportedly sold 1.5m shares
- Valeant's largest shareholder reportedly sold off 1.5 million shares last week, according to the Wall Street Journal. The Sequoia Fund, run by Ruane, Cunniff & Goldfarb Inc., owned nearly 13 million shares in the troubled drugmaker as of December 31, 2015.
- But the steady decline in the value of Valeant's stock has hit the mutual fund hard, accounting for most of the year over year decline in the fund's portfolio. Last week, Valeant's stock collapsed by over 60% after the company slashed its sales guidance for 2016 by $1.5 billion.
- Sequoia sold the shares in order to reduce the taxes of its investors by booking capital losses, the Journal reported.
In a note to investors in its 2015 annual report, the managers of the Sequoia Fund placed the blame for its underperformance last year squarely on Valeant's troubles.
"As the largest shareholder of Valeant, our own credibility as investors has been damaged by this saga.We’ve seen higher-than-normal redemptions in the Fund, had two of our five independent directors resign in October and been sued by two Sequoia shareholders over our concentration in Valeant," wrote Robert D. Goldfarb and David M. Poppe at the time.
Around 50 U.S. companies include the mutual fund as an investment option for employee retirement accounts, now potentially exposing those accounts to Valeant-related losses, according to the Journal's report.
Meanwhile, Valeant's second largest shareholder - Bill Ackman's Pershing Square Capital - has doubled down. The company announced Ackman would be joining Valeant's board of directors on Monday when it revealed it was searching for a successor to CEO Michaeal Pearson.
Ackman increases Pershing Square's representation on the board and appears set to take a more active role in the management of the company. Pershing Square owns 9% of Valeant.
The value of Valeant's stock has risen slightly from last week's levels, perhaps a sign investors are hopeful new leadership will move the company forward. But there could be more trouble to come: Valeant needs to file its annual report with the SEC before April 29 or it could default on some of its debt.
- Wall Street Journal Sequoia Fund Sold 1.5 Million Shares of Valeant Pharmaceuticals
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