The Morning Brief: Valeant Plunges to Lowest Price of the Year

March 10, 2017   Stephen Taub


Valeant’s stock is down 20 percent for the year and has dropped more than 31 percent from its 2017 high.

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Shares of Valeant Pharmaceuticals International fell to their lowest closing price of the year after Morgan Stanley cut its price target on the drug company from $17 to $12. In a note to clients, the investment bank said it expects 2017 estimated cash flow to "fall below guidance due to divestitures" and 2018 cash flow "to decline slightly due to generic pressures." Meanwhile, Valeant announced a $2.5 billion debt offering that’s part of a previously planned refinancing and amendment of its existing credit agreement. The company said it will use proceeds from the offering and a new term loan to repay debt and to finance a tender offer to buy up to $600 million of its 6.75 percent senior notes due 2018. Shares of Valeant fell 2.7 percent to close at $11.56. The stock is now down 20 percent for the year and has dropped more than 31 percent from its 2017 high. As we earlier reported, in the fourth quarter John Paulson’s Paulson and Co. remained the largest investor with nearly 19.4 million shares. Bill Ackman’s Pershing Square Capital Management, the second-largest shareholder, pared its stake by 16 percent, or nearly 3.5 million shares, to a little more than 18.1 million shares. Jeff Ubben’s ValueAct Capital remained the third largest shareholder, while PointState Capital sold all of its roughly 8.5 million shares.

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Shares of hedge fund favorite Tailored Brands fell by more than 32 percent to $15.84 after Mizuho Securities downgraded the men’s clothing retailer from Buy to Neutral and cut its price target from $25 to $18, according to published reports. The stock is now down 62 percent from its December 21 high. The company was formerly known as Men’s Wearhouse, a one-time activist target of Ricky Sandler’s Eminence Capital Management, the largest shareholder at year-end. On January 30 Eminence bought an additional 1.11 million shares for $20.05 per share, boosting its stake to 14.9 percent. At year-end, Larry Robbins’ Glenview Capital Management was the fourth largest shareholder.

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Blue Harbour Group sold more than 5.27 million shares of BWX Technologies, or nearly half its stake on March 7 for $45.67 per share. This leaves the activist hedge fund headed by Cliff Robbins with 5.3 percent of the supplier of nuclear components and fuel to the U.S. government.

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Two hedge funds managed by Bienville Capital Management extended their already-strong gains in February. The Bienville Brazil Opportunities Fund LP rose 6.2 percent last month and is now up 15.7 percent for the year. It invests in Brazilian equities, mostly mid-sized companies. The Bienville Argentina Opportunities Fund gained 1.7 percent in February and is now up 16.6 percent for the year. The fund invests in Argentine real estate; public securities including financial services, energy, homebuilders and other sectors; and private equity.

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Activist hedge funds surged 2.53 percent in February, making them the top-performing hedge funds for the month, according to eVestment. They are up 3.03 percent for the year. By comparison, the average hedge fund was up 1.08 percent last month, according to the data collector. In addition, more than 70 percent of funds were profitable for the third straight month.


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