Liberty

I suppose they could still try to burn the furniture by making a big acquisition (what leverage do they have to get a good price now that everybody knows they're desperate, though?) that makes them too hard to swallow for Valeant, or for assets that are unappealing to Valeant. Pearson has already said that if Allergan did big buybacks, it wouldn't matter, they'd just adjust their offer. Not too sure what else. Maybe some more aggressive PR tactics and lawsuits? Getting a bit late for that, though. Interesting trivia: Pyott has been with Allergan since 1998 and he only owns 165,000 shares, out of 267.5 million outstanding (0.06%). He would own more if he hadn't been selling so much (now he says VRX is undervaluing AGN, but a few months ago he was selling big chunks of what he gets from options at half the price)... Insiders own almost nothing of AGN. Yet they try to control the company like they were owner-operators and try to block a shareholder vote...

http://nypost.com/2014/08/22/ackman-gets-needed-allergan-votes/

I'd be curious to compare how many fines and regulatory problems Berkshire had against other companies worth 100s of billions... I doubt zero is a realistic number for any of them.

http://dealbook.nytimes.com/2014/08/21/botox-maker-allergans-suit-against-valeant-wont-delay-special-meeting/ Looks like the Allergan lawsuit won't succeed in delaying the special meeting...

http://www.peridotcapital.com/2014/08/sears-shop-your-way-not-a-better-mouse-trap.html (sorry if this has already been posted, I couldn't find it, and I know Peridot might hesitate to self-link)

Very nice Q.

Looks like Allergan is not in active talks with Salix after all. "Dormant" is the word that Bloomberg uses: http://www.bloomberg.com/news/2014-08-20/allergan-talks-to-buy-salix-in-defense-move-said-to-be-dormant.html

Thank you Max! Much appreciated! :)

Good point, though in the context of the discussion, I would say that this was a change of jockey that led to the problem. No two business leaders have the same capital allocation skills, strategic mind, operational skills, etc. If a big part of your thesis about Valeant is Pearson, or about Liberty Media is about Malone, if someone else takes over, you have to do your homework all over again and consider selling.

Hopefully it truly is the light at the end of the tunnel -- and it's not a train.

From memory, it was on the precipice because of things that Magness did before Malone came on board. Malone's first few years were basically making sure the company survived and fixing the debt so that it was better structured (bulkheads!) and sustainable. Unless I'm misremembering things, after that they never had that situation again.

That's one way to answer it. I fall partly there too - trust the jockey - and partly I have confidence in the individual businesses to hold their own (there's never a perfect world where you have no competition, but if you have a good competitive position you can still be very profitable and grow). I think the main difference is that when TCI was around, aggressively buying companies, focusing on cashflow instead of GAAP earnings, keeping leverage and amortization charges high to shield taxes, there wasn't much to compare it too. Today with VRX, we can look back at TCI and all the other similar businesses and capital allocators, so the hurdle isn't nearly as high. Of course VRX detractors will say that the companies have nothing in common, but time will tell. I probably wouldn't have either, for the reason I just stated above. Today there's a lot more context to understand companies that do things that way.

The difference I find with Malone's businesses is that the Liberty family is not trying to "revolutionize" anything... Malone isn't trying to change how cable TV is done... Instead, what I think I am not able to judge is Pearson's true ability to change how money is spent and capital is allocated in the pharma industry... If you think of it, that is a HUGE bet!... If he truly is successful, he will be wildly so!!!... But what if he is wrong, instead? With all that debt? And a lot of people who have been working in the pharma industry for decades actually think he might be wrong... I don't know... Really... What I am sure about is, if he is proven right, VRX is trading at a "massive discount" to its IV! On the contrary, if he is wrong, VRX might be fairly valued (or even overvalued) today. Gio TCI was pretty radical in its model back in the day (Liberty Global's model is based on that), and before Malone had a multi-decade track record, many didn't trust it; and today, you could find all kinds of other issues for the various Malone businesses too. Cord cutters, competition from telecoms, will Sirius be killed by smartphones streaming, is QVC going the way of dinosaurs, will the ecommerce businesses ever turn around, etc. You have to answer these questions to be comfortable with the businesses. Same with VRX. You have to answer certain questions to be comfortable with it. Personally, I think the whole "VRX's model is revolutionary and radical" is a bit overplayed. The media loves that stuff, but the reality is a bit more down to earth. What they're doing is focusing on certain products and markets that they think have more favorable characteristics, and not investing money where they see ROI being low, like a lot of R&D and SG&A bureaucracy. That's not revolutionary, that's just good capital allocation IMO. The only reason why it seems radical is because the rest of the industry mostly doesn't have that make-every-penny-count approach. They have huge margins, and so the institutional imperative made them fill all that headroom with SG&A and R&D and empire building in unfavorable markets, chasing blockbusters, etc, past the point of diminishing returns.

I don't think you have to know the future to find VRX a good investment. You just have to look at the past and present, understand the model and assets, and develop some level of comfort with management's talent and integrity. Basically, the same as any other investment. To each their own. A lot of people also wouldn't touch the Malone businesses because they have poor GAAP numbers, lots of debt, do a lot of M&A, and are very complex.

http://basehitinvesting.com/the-stock-market-a-look-at-the-last-200-years/

Laptops and electric vehicles have different design parameters for their batteries and how they are used, even when they use the same cells. There are ways to make batteries last a lot longer, for example by never fully charging and discharging them (in a way that is not visible to the user), and when they deteriorate you start to use that buffer to mask the decline, and only after a long time do you have a decline in performance visible to the customer. I expect most EVs batteries to last the life of the vehicle and few people to replace them. They'll get fewer miles out of a full charge toward the end of their life, just like a gasoline cars gets fewer miles out of a full tank after 10 years or whatever, but they won't suddenly go dead and stop working. I think most batteries that will end up being replaced will be replaced not because they deteriorate too much, but because newer much better, and cheaper, batteries will be available in 5-10 years and some people will want the upgrade. There are many hybrids that have been used as taxis and have hundreds of thousands of miles on the counter, and they're still going fine. This is an important test because most have older battery tech (NiMH), and because a smaller hybrid battery cycles a lot more often than a larger full EV's battery. That's my understanding of the situation, anyway.

This was a great reassurance for me that EMH is complete nonsense in the short term. Really amazing to witness how most of the analysts' estimates simply track the stock price movement of the world's (second) largest company. You could easily see it because really nothing fundamentally changed at AAPL within the past 12 months, except for their improved capital allocation. Yet, even the announcement of this huge buy-back program last year was not enough to change the average analyst's sentiment. It was only after the stock price had started moving in a sustained fashion that analysts changed course. The simple answer, in my opinion, is that it's not sufficient for a lot of people to be looking at something. If most people misunderstand a company, they're going to misprice it one way or the other, even if it's big.

I can't even begin to unravel the non-sequiturs. I think I'm done for now.

http://hoydenabouttown.com/wp-content/uploads/2013/10/inigo-montoya_that-word.jpg (Replace "word" by "argument"...)

Up over 60% since the recent lows. I suppose megacaps aren't always efficiently priced after all? ;)

Ah, another classic. Incredibly flawed, of course: http://www.update.uu.se/~fbendz/nogod/pascal.htm http://rationalwiki.org/wiki/Pascal's_wager http://wiki.ironchariots.org/index.php?title=Pascal%27s_Wager http://infidels.org/library/modern/mathew/arguments.html#pascal

This is one of the most ridiculous cop outs I've ever seen. Oh, when science is against me, I simply brush aside science, the best system devised by humanity to figure out what is true and what is false, which obviously works... And building machines? Do you even know what science is? It's a way of testing hypotheses, simple as that. God is a hypothesis, and if there's no good evidence to support it, there's no reason to think its true. Please tell us what. You are misreading it. Otherwise, the supernatural would include anything we don't understand. Was quantum mechanics supernatural before Niels Bohr came around? What is meant instead is exactly what I said a few posts ago. The laws of nature are what they are regardless of whether we know them or not, so even 10,000 years ago, gravity wasn't supernatural. Don't confuse the map with the territory. As far as we understand it, it doesn't transcend the laws of nature, no. The laws of nature are what they are, and we are still discovering them, but we haven't found a message from a deity in the microwave background radiation or anything that doesn't add up like that. Again: Not understanding something isn't evidence that it's magical. For magic to exist, you need evidence of magic, not just something you don't understand so people can pretend there's magic in there even if they have no evidence. You're using human intuition. It doesn't work on the cosmological scale. Our brains haven't evolved to deal with physics on that scale of time and space and energy. In the same way that quantum mechanics doesn't seem to make sense yet works and is provable by experiment, and that Einsteinian relativistic mechanics is also extremely unintuitive and still works (GPS systems use it every day), the big bang doesn't have to make sense to you. There doesn't need to be anything before or even time, though there might be. We're working on it, but nothing we've found about it is evidence of the supernatural. Big bang can be singular or cyclical, whatever, but like gravity before we understood it, that doesn't make them not part of nature. If the last refuge of the religious is vaguely implying that not having an answer to every single thing that goes on in the universe means there's a god, it says more about their lack of credibility than anything else. That would make the world totally different. But I'd have to figure out which god it is and what he wants based on whatever evidence made me believe. What if it's a malevolent god? What if he wants me to pray 5 times a day? What if he thinks women are inferior and slavery is ok? Let me ask you this: What's falsifiable about your belief in god? What would be different in the world if there's no god? I haven't explored it? I think I know more about it than you do, quite obviously. Historical evidence that a guy existed has nothing to do with him being a god. How many times do we have to say that? Oh, and it's funny how you even misunderstand the dragon analogy and took it so literally. I wasn't saying there's no evidence that a guy named jesus existed, or the many guys who wrote the bible decades later, filling it with attrocities and dubious morals (remember evilbible.com?). I'm saying there's no evidence that any of it is magical, supernatural, godlike, just like there's no evidence for dragons. You turned this into: "but there's evidence for a man named jesus" rather than "but there's evidence that he's a god". And if you find the resurrection easy to believe without evidence of it, I still have that bridge for sale.

???

There are rumors that AGN might be about to buy either SLXP or JAZZ. http://online.wsj.com/articles/allergan-has-approached-salix-pharmaceuticals-about-acquisition-1408467996 Buried in the article: "Meantime, Valeant is getting close to securing the support of 25% of Allergan shareholders needed to call a special meeting, according to a person familiar with the matter."

To be fair, that's up for debate. Atheism can either mean 'a lack of belief in deities' or 'a belief in the lack of deities'. Bertrand Russell said about this: I guess you're talking to the ordinary man :) . Yes, if I was to be very precise and formal about it, I would describe myself as an agnostic. Richard Dawkins said the same thing about himself. But by that standard, I would also be agnostic about Santa Claus, the Tooth Fairy, and Leprechauns. At some point, in ordinary discourse, you can just call yourself and atheist and say you don't believe in santa claus and people know what you mean :)