Bill Ackman

Valeant Pharmaceuticals’ stock is falling for the second day in a row on news that the company is being probed by the SEC.

Valeant’s 10k filing reports that the regulatory agency is investigating the pharma company’s subsidiary Salix, which Valeant acquired in 2015 for about $14.5 billion:

“The SEC is conducting a formal investigation into possible securities law violations by Salix relating to disclosures by Salix of inventory amounts in the distribution channel and related issues in press releases, on analyst calls and in Salix’s various SEC filings, as well as related accounting issues. Salix and the Company are cooperating with the SEC in its investigation, including through the production of documents to the SEC Enforcement staff.

“The Company cannot predict the outcome or the duration of the SEC investigation or any other legal proceedings or any enforcement actions or other remedies that may be imposed on Salix or the Company arising out of the SEC investigation.”

The Salix acquisition was basically the culmination of Valeant’s years-long buying spree, during which the company grew to a market cap of about $40 billion. The spree ended with the company’s failed attempt to buy Allergan. For that deal, it partnered with hedge fund billionaire Bill Ackman, who has been the company’s most vocal shareholder ever since.

Now, though, Valeant’s market cap is hovering at about only $5.6 billion. That’s all thanks to a combination of accusations of accounting malfeasance from short sellers on Wall Street, and government scrutiny over the company’s drug pricing practices.

On Tuesday the company reported an earnings beat, but because its outlook for 2017 remained dismal, Wall Street punished the company with a 14% stock drop. 

Valeant chart


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