Mr Ackman, 1 Forgive You. Mike Fooled Most Everybody...
Bill Ackman gave a presentation on Valeant (NYSE:VRX) together with its human relationship amongst Philidor on thirty Oct 2015. Most people cry back the presentation because it went for iv hours.
I but cry back this slide:
It says that Pershing Square's perspective is - together with I quote:
It too states that at that spot volition hold out "no to a greater extent than “price increase” deals together with that cost increment deals were alone iv out of but about 150 historical acquisitions.
Mike Pearson (the CEO of Valeant - right away on medical function out at an undisclosed location) has repeatedly supported roughly this view. After all aspect at the outset quarter conference telephone telephone from final twelvemonth (transcript here). Mike Pearson is asked specifically most cost versus volume. To quote:
The response:
Alas it is non true!
Today nosotros got an insight into Valeant's cost together with book strategy together with it categorically demonstrates that Pershing Square's perspective (as quoted above) is false. The root is a summary of Valeant's documents given inwards answer to Congressional subpoenas.
One tartly pertinent quote:
Mike Pearson lied inwards the conference call. This seems beyond dispute. Just compare the quotes.
Moreover the Congressional documents demo that multiple acquisitions receive got been driven yesteryear a pricing strategy. Bill Ackman said that "price increment deals" were a youngster purpose of Valeant's strategy. He has been proven wrong.
I create non intend Mr Ackman was deliberately wrong. Mike Pearson misled the basis inwards the outset quarter conference telephone telephone (and inwards other conference calls). Mr Ackman was incorrect because Mike Pearson misled him.
And that is understandable. Mike Pearson convinced many people.
So Bill, yous told the basis untruths, but they were non deliberate. Mike fooled you.
Love equally always,
John
Post script:
Some may enquire why I picked on Pershing Square equally the victim of Mike Pearson's apparent deceptions. After all Ruane, Cuniff & Goldfarb, T. Rowe Price, ValueAct Capital Management, Viking Global, Paulson & Co. together with an ambush of Tiger Cubs are major Valeant holders.
I picked on Pershing Square because of this - a slide inwards an old Pershing Square presentation:
Pershing Square signed a confidentiality understanding (9 Feb 2014) together with this allowed them to deport "substantial due diligence" on Valeant. This included:
We right away know that many acquisitions were cost driven together with growth was driven yesteryear pricing but Mr Ackman told us otherwise...
Either
(a) Mr Ackman knew that cost non book was the driver but told us otherwise
or
(b) Mr Ackman idea he was telling the truth when he said that volume, non cost was the driver. But he idea that because the companionship systematically misled him. The deception came non alone from Mr Pearson but was repeated throughout "extensive administration interviews".
I believe Mr Ackman idea he was telling the truth. (I could hold out persuaded otherwise but at this fourth dimension Mr Pearson's credibility is to a greater extent than questionable.)
And if Mr Ackman idea he was telling the truth together with he was systematically misled it is pretty obvious what he must do. He must sell his stock. He owns lots of Valeant stock.
If he keeps his stock right away he is stating loudly together with clearly that it is acceptable for him to invest thirty pct of his clients' coin inwards a companionship which systematically misled him non but at CEO grade but during "extensive administration interviews".
Pershing Square sure cares to a greater extent than most the investment procedure than that.
J
I but cry back this slide:
It says that Pershing Square's perspective is - together with I quote:
- Volume is principal growth driver for 90% of Valeant’s business
It too states that at that spot volition hold out "no to a greater extent than “price increase” deals together with that cost increment deals were alone iv out of but about 150 historical acquisitions.
Mike Pearson (the CEO of Valeant - right away on medical function out at an undisclosed location) has repeatedly supported roughly this view. After all aspect at the outset quarter conference telephone telephone from final twelvemonth (transcript here). Mike Pearson is asked specifically most cost versus volume. To quote:
Gary Nachman - Goldman Sachs - Analyst
...And thence if yous could quantify a piddling chip how much was cost versus book that contributed to growth inwards 1Q? And what create yous constituent inwards your full-year guidance cost versus volume?
The response:
J. Michael Pearson - Valeant Pharmaceuticals International Inc - Chairman & CEO
In terms of cost volume, genuinely book was greater than cost inwards terms of our growth. Outside the U.S. it's all volume. In fact, nosotros had negative cost exterior the U.S. amongst FX. And inwards the U.S. it's shifting to a greater extent than to book than price, together with nosotros await that to proceed amongst our launch brands.
H5N1 lot of our prices for most of our products are negotiated amongst managed care. And there's alone a express amount of cost that nosotros tin take. And thence if yous aspect at our consumer business, really little. Walmart doesn't similar cost increases. If yous aspect at our contact lens business, we're non discounting contact lenses. We are keeping the prices the same. I intend at that spot is some vibrations inwards the marketplace that there's discounting going on. We're non discounting, but that's all book growth. And similarly inwards the cataract surgical procedure market, again, we're but belongings our prices. So it's primarily volume, together with nosotros await that to continue.You encounter everything that Bill Ackman said was consistent amongst what Mike Pearson was saying.
Alas it is non true!
Today nosotros got an insight into Valeant's cost together with book strategy together with it categorically demonstrates that Pershing Square's perspective (as quoted above) is false. The root is a summary of Valeant's documents given inwards answer to Congressional subpoenas.
One tartly pertinent quote:
On May 21, 2015, then-Chief Financial Officer Howard Schiller sent an e-mail to Mr. Pearson amongst the dependent area “price volume.” He wrote: “Last night, i of the investors asked most cost vs book for Q1. Excluding marathon, cost represented most 60% of our growth. If yous include marathon, cost represents most 80%.”You encounter Mike Pearson plainly knew that growth was driven yesteryear price. If yous include Marathon (the Nitropress together with Isuprel acquisition) cost represented lxxx pct of volume. And that was an e-mail from Howard Schiller (current acting CEO) to Mike Pearson (now CEO).
Mike Pearson lied inwards the conference call. This seems beyond dispute. Just compare the quotes.
Moreover the Congressional documents demo that multiple acquisitions receive got been driven yesteryear a pricing strategy. Bill Ackman said that "price increment deals" were a youngster purpose of Valeant's strategy. He has been proven wrong.
I create non intend Mr Ackman was deliberately wrong. Mike Pearson misled the basis inwards the outset quarter conference telephone telephone (and inwards other conference calls). Mr Ackman was incorrect because Mike Pearson misled him.
And that is understandable. Mike Pearson convinced many people.
So Bill, yous told the basis untruths, but they were non deliberate. Mike fooled you.
Love equally always,
John
Post script:
Some may enquire why I picked on Pershing Square equally the victim of Mike Pearson's apparent deceptions. After all Ruane, Cuniff & Goldfarb, T. Rowe Price, ValueAct Capital Management, Viking Global, Paulson & Co. together with an ambush of Tiger Cubs are major Valeant holders.
I picked on Pershing Square because of this - a slide inwards an old Pershing Square presentation:
Pershing Square signed a confidentiality understanding (9 Feb 2014) together with this allowed them to deport "substantial due diligence" on Valeant. This included:
- extensive administration interviews
- a review of bring upwards together with regional concern plans
- a review of historical together with projected organic growth yesteryear concern unit of measurement together with region.
We right away know that many acquisitions were cost driven together with growth was driven yesteryear pricing but Mr Ackman told us otherwise...
Either
(a) Mr Ackman knew that cost non book was the driver but told us otherwise
or
(b) Mr Ackman idea he was telling the truth when he said that volume, non cost was the driver. But he idea that because the companionship systematically misled him. The deception came non alone from Mr Pearson but was repeated throughout "extensive administration interviews".
I believe Mr Ackman idea he was telling the truth. (I could hold out persuaded otherwise but at this fourth dimension Mr Pearson's credibility is to a greater extent than questionable.)
And if Mr Ackman idea he was telling the truth together with he was systematically misled it is pretty obvious what he must do. He must sell his stock. He owns lots of Valeant stock.
If he keeps his stock right away he is stating loudly together with clearly that it is acceptable for him to invest thirty pct of his clients' coin inwards a companionship which systematically misled him non but at CEO grade but during "extensive administration interviews".
Pershing Square sure cares to a greater extent than most the investment procedure than that.
J
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