Hedge Funds Creep Into Valeant Seeing Rebound That Eluded Ackman

  • Deerfield, Bogle, Point72 take new small stakes in drugmaker
  • Shares of Valeant have risen 65% since mid-April low

Hedge funds are tiptoeing into Valeant Pharmaceuticals International Inc. after its shares collapsed over the last year and forced Bill Ackman to dump his position for a big loss.

Thirty-five hedge funds made small wagers in Valeant in the first quarter, according to data compiled by Bloomberg, reflecting a cautiousness that the worst may not be over for the drugmaker. Deerfield Management took a new stake of 1.5 million shares valued at $16.5 million as of March 31. Bogle Investment Management and Point72 Asset Management also initiated investments, according to regulatory filings Monday. Saba Capital Management added to its holding. 

Valeant burned many investors over the last two years. The drug company built itself through a string of debt-laden acquisitions, only to face scrutiny over its aggressive pricing and business practices. The stock plunged 97 percent from its August 2015 peak to its April low.

Ackman, the founder of Pershing Square Capital Management, called his investment -- which led to a loss of about $4 billion -- “a huge mistake.” In the first quarter, as he sold his remaining 18.1 million shares, hedge funds bought small positions.

The 35 funds combined to purchase $162 million worth of shares as of March 31, the filings show. That’s an increase from the fourth quarter, when 31 funds bought $127 million in Valeant stock.

Since hitting a nine-year low on April 21, the stock has started to rebound, climbing 65 percent. The company raised its full-year forecast for adjusted earnings on May 9, and Chief Executive Officer Joe Papa has said the company is making progress with its turnaround.

ValueAct Capital Management, the second-largest holder of Valeant shares, disclosed in March that it added 3 million shares in the first quarter, bringing its total stake to $198.5 million. The largest stakeholder, Paulson & Co., stayed put in the quarter.

A Valeant spokeswoman said the company doesn’t comment on stock holdings.

— With assistance by Brandon Kochkodin

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