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Prominent funds piled into Valeant ahead of tailspin
[NEW YORK] Some of the world's biggest hedge funds extended bets on Valeant during the third quarter, only weeks before the pharmaceutical company's stock went into a tailspin after criticism over its pricing strategy and accounting practices.
Andreas Halvorsen's Viking Global Investors, long a top performing fund, bought 376,615 Valeant shares sometime between July and the end of September to own 4.9 million shares at the end of the quarter, according to a filing made on Monday. Brahman Capital raised its stake by 958,300 shares to own roughly 4 million shares while Hound Capital bought an additional 1.2 million shares, making Valeant the fund's biggest position with nearly 4 million shares, the filings show.
Marble Arch, Blue Mountain, Farallon and Adage also spent more money on Valeant during the summer months after Valeant became one of the market's best performers during the first half of the year, notching gains on an aggressive acquisition strategy.
To be sure, the regulatory filings are backward looking and do not show what the funds now hold.
But their purchases were ill-timed. Valeant stock has cratered 70 per cent in the last three months, hit by criticism from high-profile politicians like Hillary Clinton over its policy of raising prices for drugs gone off patent and allegations it used a mail order pharmacy to inflate revenues.
Valeant has denied the allegations.
Blue Mountain, for example, told investors that it exited the stock in October but held out the possibility of getting in again in the future.
Bill Ackman's Pershing Square Capital Management became the company's biggest cheerleader this year when he announced a new position in March and hailed the company for it acquisitions strategy at an investment conference in May, even comparing its prospects to those of Warren Buffett's Berkshire Hathaway.
Ackman's fund owned 19.4 million shares during the third quarter and bought more to own 21.4 million shares now, Ackman has said.
While there were many funds who loaded up, there were also those who cut their positions, according to data compiled for Reuters by research firm Symmetric.io.
Nehal Chopra's Tiger Ratan Capital Management, for example, dramatically cut its position by selling 720,472 shares to own 317,561 shares at the end of the quarter.
Hoplite Capital cut its position by 287,573 to own 586,716 shares. Two Sigma Investments, Meru Capital Group and Arrow Capital also cut their positions.