Not arguing about the fundamentals. This rollup business has been troubling for a lot of people for a long time and it unraveled and now they stand to lose money on many assets that they are selling at a loss to raise capital to reduce debt. Past management can be thanked for that mess. No doubt recent price action correlated with annual report filings. But again, this is just something that makes me go 'hmm'.
Journalists may have reported the February 28 result as "beating the number", but given the $29 billion in debt, the company's plans to refinance and/or repay its debt is more important. So I don't think the "earnings beat" was particularly relevant. Agreed - it's not possible to tell if one of us (or none of us) is correct with our explanation. Maybe a better way of expressing my view is to say that I don't think the Ackman "news" is particularly relevant on a multi-month or multi-year timeframe. If there was heavy put buying on Monday, then maybe I'd agree with you. But in the absence of that evidence, I don't think it's a good explanation for the weakness in the stock since February 28. .
Debt is no secret though. This was known for a year since the stock has topped. Issue about current cash flow and ability to sell non-core or even core assets plus its affect on future cash flow, is known. What changed? It had a whole year to 'sell off' from that news, which is not news anymore at this point. Why the drawn out week long drawdown from the 16s to the 12s as of late? Another huge long throwing in their towel? Why the sudden price dump at the open over the past few days? I mentioned earlier I thought (with my noob eyes) this wasn't 'normal' behavior of liqudiation. Usually liquidations are more linear along VWAP because you piecemeal it to get better overall execution price. But the past few days has been huge dumps on the open and gap moves. You're right. The earnings probably had a bigger role than ack selling on the down pressure in price. But ack's capitulation is not immaterial though in terms of sentiment. He was one of the biggest and most vocal bulls of the stock. He was an insider. So his selling is not 'positive', except for the fact you can spin this as 'less overhang of potential selling' because everyone seems to be 'waiting' when this move would happen. Either forced by redemptions or otherwise from poor overall performance and negative street coverage in general due to war with carl. Lets assume a fictional scenario. Someone wants to sell a huge 5% stake in AAAAA stock privately. The lot is shopped around other potential big wig buyers - the real kinda wolves. Knowing this impeding news, someone agrees to the deal. Maybe sale price of the lot is determined as an average of the following 5 trading days + discount factor as a sweetener. But guy starts shorting stock days in advance with the largely negative earnings as back wind. Eventually buys to cover with stock from private sale. Win. Is such a scenario out of the realm of possibility?
very good analysis of what Bill ended up paying for this particular habbit: https://www.bloomberg.com/view/articles/2017-03-14/bill-ackman-is-done-losing-money-on-valeant
That seagull... Jeez! But apart from the numbers, I actually found the last part of what Matt Levine wrote very thoughtful. Prior to him mentioning it, I haven't considered Ackman's VRX adventure as a particularly painful case of "mandate drift".
"Aussie John Hempton beat Wall Street royalty on Valeant" http://www.afr.com/markets/aussie-john-hempton-beat-wall-street-royalty-on-valeant-20170314-guy6g8 Bronte Capital blog posts about VRX: http://brontecapital.blogspot.com.au/2014/06/valeant-pharmaceuticals-international.html http://brontecapital.blogspot.com.au/2014/06/valeant-pharmaceuticals-part-ii-gaap.html .
www dot twitter dot com/CGrantWSJ/status/842093461515956224 "JPM downgrades $VRX credit to neutral, sees best case SOTP EV of $31.3 billion." "their low case is about $25b" .