Canadian Stocks Retreat as Valeant Extends Plunge, Magna Slides

  • Valeant hits lowest since 2013, bringing 3-month loss to 70%
  • Declines in euro, loonie blamed as Magna slides most since '11

Canadian stocks retreated as Valeant Pharmaceuticals International Inc. declined to a two-year low and Magna International Inc. tumbled the most since 2011 on weaker quarterly sales.

Valeant sank 15 percent for a third day of losses, to a September 2013 low. The drugmaker has now lost 70 percent from an Aug. 5 high amid pressure over how it prices its drugs. Magna, the largest North American auto-parts supplier, tumbled 10 percent as sales slumped 7 percent in the third quarter, missing analysts’ estimates. The two companies accounted for almost 70 points of the Standard & Poor’s/TSX Composite Index’s 103.04 point decline.

The Canadian benchmark equity gauge dropped 0.8 percent to 13,558.78 at 4 p.m. in Toronto. The index climbed 1.7 percent in October, the most since April. It was nevertheless the worst performance among 24 developed-nation markets in that time, as a gauge of global equities capped its best month in four years.

Valeant, briefly the largest stock in the S&P/TSX by market capitalization earlier this year, plunged a record 49 percent in October after short-seller Citron Research accused Valeant of an Enron-like strategy of recording fake sales using an affiliated pharmacy. Valeant denied the allegation.

The Quebec-based drugmaker and Turing Pharmaceuticals AG are the focus of two probes in Congress seeking to examine why the companies raised the prices of medications sharply after acquiring them. Jana Partners yesterday disclosed it had sold its stake in Valeant due to concerns about the company’s changing business model.

Investor Bill Ackman, one of Valeant’s top shareholders, gave Chief Executive Officer Mike Pearson a fresh vote of confidence Thursday. While he disagreed with some of Pearson’s decisions, Ackman said in a letter he felt he was the right CEO for the drugmaker.

Ackman’s letter came after an earlier interview published late Wednesday in which he told the Wall Street Journal how he has pressed the drugmaker’s executives for answers and has told the company’s lead director that Pearson may need to leave.

Magna International tumbled 10 percent after blaming weakness in the euro and Canadian dollar against the U.S. dollar for the “significant negative impact” on sales. Foreign currency translation reduced revenue by about $870 million compared with year-ago figures, Magna said.

Smaller peer Linamar Corp. also tumbled 7.5 percent for the biggest decline in three months after TD Securities analyst Brian Morrison lowered his rating for the stock to a hold from a buy as consumer discretionary shares lost 2.8 percent.

Magna is among more than 40 companies in the S&P/TSX reporting quarterly earnings today. Penn West Petroleum Ltd. dropped 8.7 percent as revenue slumped. The company suspended its dividend and cut its workforce by about a third during the quarter. Paramount Resources Ltd. plunged the most in almost three decades after reporting a third-quarter loss late yesterday.

First Quantum Minerals Ltd. slumped 6.8 percent as copper for December delivery fell 2.9 percent in New York, the most in six weeks. Factory orders in Germany, the third-biggest copper user, unexpectedly dropped for a third month, data showed Thursday. Copper has sunk 20 percent this year as slowing Chinese growth cut demand.

Hydro One Ltd., Ontario’s largest electricity transmission and distribution company, jumped 5.5 percent in its trading debut. The Ontario government raised C$1.66 billion from the initial public offering, at a price of C$20.50 a share. The stock trades under the “H” ticker on the Toronto Stock Exchange.

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