- Mutual fund sold stake to create losses to offset capital gain
- Sequoia trails 99% of peers this year, hurt by Valeant plunge
Sequoia Fund, run by the largest shareholder in Valeant Pharmaceuticals International Inc., last week sold about 1.5 million shares of the drug company, according to a person familiar with the transaction.
The Valeant shares, which were purchased in October, were sold to create losses that can be used by the fund’s investors to offset capital gains, said the person, who asked not to be named because the information isn’t public. Valeant’s shares have plunged about 69 percent since the end of October.
The company’s stock dropped 51 percent on March 15 after Chief Executive Officer Michael Pearson disappointed investors with his forecast in a conference call. The company, whose drug pricing and distribution has come under scrutiny, said on Monday that Pearson will step down and that it’s looking for a new CEO.
Sequoia held 12.8 million Valeant shares on Dec. 31, the last time its holdings were made public. That was just a portion of the 35.4 million Valeant shares held by Ruane Cunniff & Goldfarb, which manages the $5.6 billion Sequoia Fund. Valeant represented 19 percent of Sequoia’s holdings at the end of last year.
A call to Ruane Cunniff was not immediately returned.
Sequoia, which has a stellar long-term record, lost 11 percent this year, trailing more than 99 percent of peers. It lagged behind 89 percent of rivals last year, dragged down by the Valeant collapse.
“As the largest shareholder of Valeant, our own credibility as investors has been damaged by this saga,” Sequoia’s managers, Robert Goldfarb and David Poppe, wrote in a Feb. 22 letter to shareholders.
The Wall Street Journal reported the sale of Valeant shares late yesterday.