Liberty

Just to address the recent repeated meme of "incentives encouraged the CEO to behave badly", take into account that his shares are restricted until years after he retires, and he's cut his base salary to $1. He's basically almost perfectly aligned with shareholders and with long-term sustainability, and if shareholders lose or something bad happens, the CEO will lose almost everything. His compensation was designed by ValueAct to discourage sandbagging but also to encourage long-term thinking. As for the problem that some of us have with this gang of shorts, I don't think it's that they are short, or were short Fairfax or whatever. It's how they've did it. I wasn't around at the time, but I've heard the Fairfax stories, and it seems beyond the pale and way over the line of market manipulation and bad faith...

The stake in Moody's could be seen as controversial too.

http://www.bloomberg.com/news/articles/2015-10-24/valeant-director-ingram-says-pearson-has-board-s-full-support

I think this follow up to the Munger comment is useful: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/valeant-pharmaceutilcals-international-inc-(vrx)/msg222059/#msg222059

Philidor was not listed as a 10% customer in the last annual report, so they must have done less than $800 million last year. I assume the pharmacy margins are very small. Let's say 10%. That's $80 million net revenue for Philidor. Doesn't seem material for a company with a $100B EV. If Philidor truly is "captive", margins could be even lower, which would be kind of the point (reduce leakage from middlemen taking a cut), so what Philidor keeps could be even lower than 10%.

And why should we trust Roddy Boyd's estimate? Boyd might cloak himself in journalism and create a website that looks like some non-profit public interest group, but he's not very different from Left and Hempton, and is probably working with them. I'll be waiting for the actual facts about Philidor and R/O from people who will be held accountable if they lie. Let's wait until Monday.

What's the source of this story? What "big deal" was this? Thanks. My own source. Not everything is published on the internet. The dramas in these companies aren't generally published. This was a great post by Shoham. http://cafepharma.com/boards/threads/glossary-of-hostile-takeover-terms-with-discussion.559657/page-26#post-5539609 Ok. I'm very careful with these anonymous site/forum these days (consumer complaints, reports from supposed employees inside valeant, etc). The shorts have a history of creating multiple fake accounts and posting "soft evidence" all over. In fact, I'm pretty sure some of the accounts on this forum belong to that clique. Pretty sure that Philidor thread on Cafepharma and those Philidor consumer complaints that all popped up within the past couple months are mostly posted by sock puppets of that gang. These guys have done it in the past, and aren't out to witn a Pulitzer with an editor looking over their shoulder, they have millions to gain, and I doubt very many scruples. So I mostly discount it to zero to be safe. Pearson's model has been pretty consistent and public since the day he became CEO, so I'd be surprised if any company didn't expect cuts. I know they cut more at Medicis than elsewhere, so maybe that's what you are referring to. They later said that was a mistake. I suppose that when you already have back-office capabilities and a sales distribution channel, it's sometimes tempting to cut a lot and just plug-in the assets into the existing business, especially when you buy a company that wasn't super well run (they tend to buy things that have some fixable problems). I'm sure there are many personal tragedies when cuts are made, but I'm not sure what the alternative is. Pearson has a theory that the industry is bloated and that he has a better model, and I think he should be able to try to prove it out. It happens in various industries over cycles, when things get fat, and then lean again. When Buffett praises his ceos who count sheets of toilet paper and paint only two sides of a building and the 3G guys or Fastenal or whatever, I don't think these guys run with more people than they need to. I'm sure it would suck to be a redundant Heinz or Kraft employee right now, but over the long term, if the economy can't try to allocate resources where they are most productive and try various models, things tend to become worse for everybody. I believe that contracts between employees and employers are two-way streets; it wouldn't be fair for employees to be able to resign at any time, but for employers not to be able to cut employees who they don't feel they need anymore (with proper severance, etc).

What's the source of this story? What "big deal" was this? Thanks.

Actually, I originally saw the analogy when I read this article: http://www.cnbc.com/2015/10/22/the-big-costs-behind-googles-moonshot-start-ups.html Suddenly, Valeant's claims about R&D efficiency didn't seem so far-fetched. I don't understand why people insist on measuring R&D by inputs rather than outputs. Never made any sense. And hey, once your mindset becomes focused on outputs, then it starts to become clearer that sometimes it's better to buy someone else's embedded R&D through M&A if you can get it at a good price and/or a lower risk profile...

What part of my theory is wrong? 99% of it is based on known facts. I added some narrative to tie the facts together, sure. The only real speculation is why Valeant didn't disclose Philidor. I was skeptical about Valeant's claims that they hid this relationship for competitive reasons, but when I thought about how powerful the captive pharmacy strategy is, it became plausible. Especially since competitors were so quick to disclose that they had no captive pharmacies. I also originally assumed that Philidor was setup to skirt regulatory and ethical issues. But I just couldn't get the facts to fit that narrative. Philidor is providing real benefits to doctors and patients. Are they operating in a legal grey area? Probably. And I thought the Steve Jobs analogy was actually fitting: http://www.fundamentalfinance.com/opinion/apple-options-backdating-scandal.php https://pando.com/2014/03/22/revealed-apple-and-googles-wage-fixing-cartel-involved-dozens-more-companies-over-one-million-employees/ http://www.reuters.com/article/2015/06/30/us-apple-ebooks-decision-idUSKCN0PA1RS20150630 http://www.pcworld.com/article/2933872/apple-music-faces-antitrust-investigation-in-new-york-connecticut.html Evercose says that the 10% of R/O that Philidor bought cost them $350k. Now, even if Philidor is much bigger than R/O, isn't it possible that Philidor just isn't that big compared to a large cap and the option to buy control would fall in the bucket where Valeant puts non-material deals that they don't disclose because they're too small? This would make sense if Philidor moves a lot of product but only captures a very tiny slice as margin, making the business not worth that much compared to its revenues.

Answer here

Not sure if Saurabh is on the forum, but I will convey the message to him. Yes, I applaud him for his efforts, it is not easy to get these wonderful speakers to come visit Google. Yes, I also thank him for his efforts, and thank you rishi for your inside perspective on these and your useful questions on MA/V ;)

Second level thinking would imply that their complex sign up process and intimidating platform are opportunities. If these things were already perfect, we couldn't expect much improvement, but now, if they just fix this, they can accelerate growth. And while IBKR is mostly aiming for the most profitable people (large AUM, lots of trades, sophisticated investments), they also offer back-end for other brokers. Over time, these others - if they can win enough of them - can have the simple interfaces and spend their own marketing dollars attracting more 'regular' people while IBKR focuses on a different slice of the market.

Insider Ron Farmer buying 1500 shares in the open market. Not sure how big that is for him, don't know how much capital he has.. https://www.canadianinsider.com/company?menu_tickersearch=Vrx http://www.valeant.com/about/board-of-directors/ronald-h-farmer

I've only had a chance to read it very quickly, but the latest Evercore ISI report by Umber Raffat is really worth checking out. Untangles a lot of stuff and rules out some accusations. Also interesting info that Philidor bought 10% of R/O for $350k. These things are tiny. No wonder that a large cap might not have disclosed them as material and lumped them with other tiny deals.

WSJ profile of Andrew Left: http://www.wsj.com/articles/the-short-who-sank-valeant-stock-1445557157

Apparently the new Evercore dilligence is interesting. I've only seen the screengrab here, trying to get my hands on the full thing. If you can share it, please message me. Thanks. https://twitter.com/JacobWolinsky/status/657347563478261761 Edit: A kind soul has shared two reports by this analyst with me. He seems to be doing great work verifying stuff and digging it up. I haven't had time to read it all (time for bed, will continue tomorrow), but very interesting so far.

For those who haven't had Outsider overload yet, here's William Thorndike speaking at Google:

FWIW, some tweets from someone who knows Pearson from McKinsey (Nikolai Kondratiev, @NKondratiev):

Weird, I never had to prove my identity using a notary. Probably just did fairly standard stuff, but I can't remember exactly what it was. Are you an edge case on that front (non-citizen or something like that)?

What is it that you found complicated? I don't remember it being harder than opening an account at TD Waterhouse or RBC Direct Investing (the other two that I've tried). I wonder if there's a difference between the process in Canada and the US... I'd guess it would be fairly similar, but maybe not.

http://ir.valeant.com/investor-relations/news-releases/news-release-details/2015/Valeant-Pharmaceuticals-To-Hold-Investor-Conference-Call-On-October-26-2015/default.aspx

Watched Andrew Left (Citron) on Bloomberg. Very interesting. When asked what he thought VRX was actually doing illegal, basically couldn't say, but said he was there to raise questions, and isn't it weird that one entity is suing another for $70m, that they have the same phone number, that's shady, etc. Mostly innuendo. When asked why he talked about a smoking gun and compared VRX to Enron if he can't say if there's anything illegal, he basically again said he's just raising questions. Says it's not his job to answer these questions, etc. Basically, he's just the guy screaming 'Enron' in a crowded theater after selling short. Not a bad position to be in, I suppose. Edit: http://www.bloomberg.com/news/videos/2015-10-22/valeant-s-response-amateurish-citron-s-left

Being in LILA has its privileges. TCI 3.0 No details on this? Are they going to use debt or LILAK stocks to buy it? LILAK stock is so cheap that using the stock may not make sense. Or are they going to use debt and LBTYK stock to buy it, and fold it into LILA? That makes most sense as LBTYK is much higher valued in EV/EBITDA multiple than LILAK. No detail because it's not happening yet.

Where did you see Ruane was out of VRX? If Ruane had said that, it would be plastered everywhere. I think he's saying that he saw something about Ruane where he didn't explicitly say that he held VRX, which doesn't mean anything.