Sarah Roden

About the Author Sarah Roden

Sarah writes about stock market news for TipRanks. She graduated as member of Phi Beta Kappa from the University of Richmond in Richmond, Virginia.

Bill Ackman’s Increasing Stake in Valeant Pharmaceuticals Intl Inc (VRX)

Bill Ackman is the both the founder and CEO of the hedge fund Pershing Square Capital Management. Many consider Ackman to be a contrarian investor and activist shareholder, with even Ackman himself testifying to be the latter. Ackman is also known for his sometimes bizarre hiring techniques, most notably hiring a former tennis athlete and fly fishing guide. Having been raised by Lawrence David Ackman who had been no stranger to investment successes, he set the stage for Bill Ackman to enter and successfully compete in the investment scene.

Ackman’s career took off in 1992 with the founding of the investment firm Gotham Partners and has grown with various successes to a point where his current company, Pershing Square Capital Management, was founded in 2004. With $54 million in funding coming from both Ackman and his former partner Leucadia National, the company has grown steadily and today owns assets worth billions of dollars. In the last three years, the hedge fund has realized an annual average return of 9.87%.

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Major growth for Ackman and Pershing Square Capital Management had been achieved through the acquisition and successful sale of the fast food chain Wendy’s. Ackman, ever the activist, successfully pressured Wendy’s to also sell of one of its daughter companies, Tim Hortons doughnut chain.

Most notably, Ackman increased his stake in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) in the first quarter by 30%. Pershing now owns over 21 million Valeant shares valued at more than $567 million, comprising more than 6% of its overall portfolio. This investment has drawn a lot of attention recently as Valeant has become the subject of a SEC fraud investigation and a congressional probe about its pricing practices. To add insult to injury, Valeant has been hastily revising its finances this year and dealing with mounting debt pressures. Year-to-date, shares of the embattled pharmaceutical giant have plummeted more than 75%. In the midst of this commotion, a new CEO, Mr. Papa, was brought in as the company’s new CEO with the intention to reduce debt and turn it around.

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Furthermore, Valeant is currently experiencing share price difficulties as Allergan, a company manufacturing generic pharmaceuticals, is busy with an aggressive campaign to have the patents of Valeant’s top selling medicine overturned. Allergan has a long history of successfully pursuing generic-drug opportunities, which may lead to financial difficulties for Valeant.

According to TipRanks, 7 analysts are bullish on Valeant, 10 are neutral, and 4 are bearish. The average 12-month price target between these analysts is $40.19, marking a 70% upside from current levels.


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