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Matt Levine

Ackman's Valeant Investment Keeps Getting Worse

There are few pages left in the activist investor playbook.

So here's some good news out of Valeant. Remember a couple of weeks ago, when Valeant was doing one-on-one calls with selected research analysts, and those analysts were then telling clients what they had learned? That struck people, including me, as a bit odd. A lot was going on at Valeant! Chief Executive Officer Michael Pearson was just back from medical leave, it had just withdrawn its guidance, it had discovered accounting problems that would delay the filing of its financial statements, and now the CEO was going around chatting up analysts privately? Sure, Valeant said that "in engaging in such dialogue, Valeant’s officers are cognizant of obligations under Regulation FD, and it is the company’s policy not to selectively disclose material non-public information," but it was a little difficult to believe that Valeant hadn't told those analysts anything useful. Why else have the calls, for one thing? And, for another thing, the calls seemed to move the stock:

Cynical observers like me might have expected that favored analysts and investors had gotten some inkling of what Valeant was going to disclose in its preliminary earnings and guidance today, and on its subsequent public investor call. That inkling probably didn't rise to the level of obvious material nonpublic information -- I am not that cynical -- but was probably more of a vague reassurance, along the lines of what Pearson told his executives, that "there is no other big shoe to drop that I am aware of." Enough body-language-type reassurance to calm the analysts, buoy the stock a little and provide fodder for some academic discussions of what exactly it means for information to be material.