VRX - Valeant Pharmaceuticals International Inc.

[KCLarkin]

Pearson out as CEO. Also noted "improper conduct" by the CFO.

 

Stunning. Schiller and Pearson are going to take the fall for this but it was really a flawed incentive structure:

 

The company measures returns over three or more years, and for stock awards made from 2008 to late 2012, it had to hit a minimum annual return of 15 per cent for executives to get any of their shares. Awards tripled if the company achieved 45 per cent annual returns and, for Mr. Pearson, quadrupled at 60 per cent. With this component of the plan, “the company’s executives could be among the best-paid in the industry,” Valeant said.

 

Tying compensation to TSR is flawed. Targeting 60% annual returns is just reckless. Listen to Munger's "psychology of misjudgement" on incentives to see the peril.

[muscleman]

Perplexed by the 10% positive up-move intraday.

 

The irrationality of investors doesn't amaze me any longer.

 

Well, my friend correctly identified this move, bought the calls last Friday and sold this morning for a 60% gain.

Just because you and I can't read the irrationality of the market doesn't mean other people can't.  :)

[Picasso]

Perplexed by the 10% positive up-move intraday.

 

The irrationality of investors doesn't amaze me any longer.

 

Well, my friend correctly identified this move, bought the calls last Friday and sold this morning for a 60% gain.

Just because you and I can't read the irrationality of the market doesn't mean other people can't.  :)

 

Huh?  So your friend rolled the dice on some call options and got hit with 1) ex-CFO cooking the books, 2) CEO who knows where dead bodies are getting fired, and 3) still no idea when they file 10-K, oh and 4) the auditor is probably going to resign.  I don't think him making 60% had anything to do with some fundamental price/sentiment insight. 

[muscleman]

Perplexed by the 10% positive up-move intraday.

 

The irrationality of investors doesn't amaze me any longer.

 

Well, my friend correctly identified this move, bought the calls last Friday and sold this morning for a 60% gain.

Just because you and I can't read the irrationality of the market doesn't mean other people can't.  :)

 

Huh?  So your friend rolled the dice on some call options and got hit with 1) ex-CFO cooking the books, 2) CEO who knows where dead bodies are getting fired, and 3) still no idea when they file 10-K, oh and 4) the auditor is probably going to resign.  I don't think him making 60% had anything to do with some fundamental price/sentiment insight.

 

That's true. You and I are investors. We really don't understand how an excellent trader's mind works.

Rolling the dice? Maybe he is rolling a loaded dice.  :)

 

 

 

 

[wescobrk]

My cost basis is $30 a share.

I don't let other people's opinions sway my opinion.

I got in thinking it was perhaps a binary bet but I also got in thinking it has greater than 50% probably it won't go into bk.

I'm still fine with my decision.

[Guest Grey512]

Perplexed by the 10% positive up-move intraday.

 

The irrationality of investors doesn't amaze me any longer.

 

Nice trade. Plenty of ways to skin a cat in the markets. I wonder what your friend's philosophy on sizing is.

Well, my friend correctly identified this move, bought the calls last Friday and sold this morning for a 60% gain.

Just because you and I can't read the irrationality of the market doesn't mean other people can't.  :)

 

Huh?  So your friend rolled the dice on some call options and got hit with 1) ex-CFO cooking the books, 2) CEO who knows where dead bodies are getting fired, and 3) still no idea when they file 10-K, oh and 4) the auditor is probably going to resign.  I don't think him making 60% had anything to do with some fundamental price/sentiment insight.

 

That's true. You and I are investors. We really don't understand how an excellent trader's mind works.

Rolling the dice? Maybe he is rolling a loaded dice.  :)

 

Nice trade. I wonder what your friend's philosophy on sizing is like.

[TheAiGuy]

Perplexed by the 10% positive up-move intraday.

 

The irrationality of investors doesn't amaze me any longer.

 

Well, my friend correctly identified this move, bought the calls last Friday and sold this morning for a 60% gain.

Just because you and I can't read the irrationality of the market doesn't mean other people can't.  :)

 

Huh?  So your friend rolled the dice on some call options and got hit with 1) ex-CFO cooking the books, 2) CEO who knows where dead bodies are getting fired, and 3) still no idea when they file 10-K, oh and 4) the auditor is probably going to resign.  I don't think him making 60% had anything to do with some fundamental price/sentiment insight.

 

That's true. You and I are investors. We really don't understand how an excellent trader's mind works.

Rolling the dice? Maybe he is rolling a loaded dice.  :)

 

Okay, so, maybe that's true. Probably not, though. It sounds more like your friend was lucky on a very stupid trade, but what do I know?

[doughishere]

Ol'e Billy Blue Balls is now part of the BOD.

 

 

Still dont see any Default on covenants that is non "filling" related.

 

[Guest roark33]

Valeant expects to file its Form 10-K and become current on its financial filings by April 29, 2016 (within the curing period) but to be prudent, the company also announced that it intends to seek a waiver from the lenders under its credit facility. The waiver that the company is seeking will include a request to extend the deadline to file its Form 10-K for December 31, 2015 and the deadline to file its Form 10-Q for the quarter ended March 31, 2016.

 

From today's 8-k.  Picasso pointed this out, so hat tip to him.  If they were going to be able to file by April 29, there is no need for a costly waiver, so I doubt it occurs before then....

 

I just don't know how anyone is able to "invest" in this company.  They are basically saying that they have been cooking the books and the CFO says, Nah, it was the controller, not me. 

 

To hang your hat on ebitda numbers from B+L presumes that those are correct.  If you are a buyer, what are you going to pay for a company whose numbers you can't trust and whose sales force has been pillaged. 

[writser]

Somebody should write an anthology of Michael Pearson (cum suis) comments in this thread.

[muscleman]

Perplexed by the 10% positive up-move intraday.

 

The irrationality of investors doesn't amaze me any longer.

 

Well, my friend correctly identified this move, bought the calls last Friday and sold this morning for a 60% gain.

Just because you and I can't read the irrationality of the market doesn't mean other people can't.  :)

 

Huh?  So your friend rolled the dice on some call options and got hit with 1) ex-CFO cooking the books, 2) CEO who knows where dead bodies are getting fired, and 3) still no idea when they file 10-K, oh and 4) the auditor is probably going to resign.  I don't think him making 60% had anything to do with some fundamental price/sentiment insight.

 

That's true. You and I are investors. We really don't understand how an excellent trader's mind works.

Rolling the dice? Maybe he is rolling a loaded dice.  :)

 

Okay, so, maybe that's true. Probably not, though. It sounds more like your friend was lucky on a very stupid trade, but what do I know?

 

Stupid? I thought we value investors are supposed to be humble. At least, you shouldn't easily dismiss someone else's strategy as lucky and stupid so easily without knowing much context.

My main point is that we should stop saying "Perplexed by the 10% positive up-move intraday." or "The irrationality of investors doesn't amaze me any longer. " to laugh at Mr. Market's irrationality. There are people who can read Mr. Market's mind.  :)

[muscleman]

Perplexed by the 10% positive up-move intraday.

 

The irrationality of investors doesn't amaze me any longer.

 

Nice trade. Plenty of ways to skin a cat in the markets. I wonder what your friend's philosophy on sizing is.

Well, my friend correctly identified this move, bought the calls last Friday and sold this morning for a 60% gain.

Just because you and I can't read the irrationality of the market doesn't mean other people can't.  :)

 

Huh?  So your friend rolled the dice on some call options and got hit with 1) ex-CFO cooking the books, 2) CEO who knows where dead bodies are getting fired, and 3) still no idea when they file 10-K, oh and 4) the auditor is probably going to resign.  I don't think him making 60% had anything to do with some fundamental price/sentiment insight.

 

That's true. You and I are investors. We really don't understand how an excellent trader's mind works.

Rolling the dice? Maybe he is rolling a loaded dice.  :)

 

Nice trade. I wonder what your friend's philosophy on sizing is like.

 

He started as a value guy so he puts 80-90% of his money for value investing as the bed rock of the portofolio. The rest is for trading options. The position size is usually 1-2% of his whole portfolio.

[Parsad]

Valeant expects to file its Form 10-K and become current on its financial filings by April 29, 2016 (within the curing period) but to be prudent, the company also announced that it intends to seek a waiver from the lenders under its credit facility. The waiver that the company is seeking will include a request to extend the deadline to file its Form 10-K for December 31, 2015 and the deadline to file its Form 10-Q for the quarter ended March 31, 2016.

 

From today's 8-k.  Picasso pointed this out, so hat tip to him.  If they were going to be able to file by April 29, there is no need for a costly waiver, so I doubt it occurs before then....

 

I just don't know how anyone is able to "invest" in this company.  They are basically saying that they have been cooking the books and the CFO says, Nah, it was the controller, not me. 

 

To hang your hat on ebitda numbers from B+L presumes that those are correct.  If you are a buyer, what are you going to pay for a company whose numbers you can't trust and whose sales force has been pillaged.

 

Yeah, there is some other funny business going on. 

 

How does the CFO blame the Controller for how the Philador accounting was booked?  That's one of the most absurd things the CFO could have said.  The Controller reports to the CFO, and the CFO ultimately signs off on the accounting, including treatment of how revenues are booked and any adjustments.

 

There is obviously real cash flow underneath the hood, but what else in the accounting may need restatement?  Anyone investing in Valeant is not making a binary bet...it's a speculative bet that the amount of fraud is limited.  Cheers!

[TheAiGuy]

Perplexed by the 10% positive up-move intraday.

 

The irrationality of investors doesn't amaze me any longer.

 

Well, my friend correctly identified this move, bought the calls last Friday and sold this morning for a 60% gain.

Just because you and I can't read the irrationality of the market doesn't mean other people can't.  :)

 

Huh?  So your friend rolled the dice on some call options and got hit with 1) ex-CFO cooking the books, 2) CEO who knows where dead bodies are getting fired, and 3) still no idea when they file 10-K, oh and 4) the auditor is probably going to resign.  I don't think him making 60% had anything to do with some fundamental price/sentiment insight.

 

That's true. You and I are investors. We really don't understand how an excellent trader's mind works.

Rolling the dice? Maybe he is rolling a loaded dice.  :)

 

Okay, so, maybe that's true. Probably not, though. It sounds more like your friend was lucky on a very stupid trade, but what do I know?

 

Stupid? I thought we value investors are supposed to be humble. At least, you shouldn't easily dismiss someone else's strategy as lucky and stupid so easily without knowing much context.

My main point is that we should stop saying "Perplexed by the 10% positive up-move intraday." or "The irrationality of investors doesn't amaze me any longer. " to laugh at Mr. Market's irrationality. There are people who can read Mr. Market's mind.  :)

 

Eh, I did say "probably," which is my take at humility.

 

But I feel pretty comfortable dismissing this utterly absurd claim out of hand without context.

[moneyball]

Not to step into an argument, but I can see the options as a smart way to play with vol. The issue would be whether there is a mispricing of vol, which I could see on the calls, but whether that means you should feel comfortable buying is a different story.

[TheAiGuy]

Not to step into an argument, but I can see the options as a smart way to play with vol. The issue would be whether there is a mispricing of vol, which I could see on the calls, but whether that means you should feel comfortable buying is a different story.

 

Supposedly, the volatility is embedded in the price. Supposedly.

 

I admit, that's pretty weak and you could easily imagine a scenario in which you don't believe the volatility is embedded in the options price and you believe delta is underpriced, for example, in which case it would make sense to buy the option to "play" the volatility. But, you know, good luck with that.

[moneyball]

Not to step into an argument, but I can see the options as a smart way to play with vol. The issue would be whether there is a mispricing of vol, which I could see on the calls, but whether that means you should feel comfortable buying is a different story.

 

Supposedly, the volatility is embedded in the price. Supposedly.

 

I admit, that's pretty weak and you could easily imagine a scenario in which you don't believe the volatility is embedded in the options price and you believe delta is underpriced, for example, in which case it would make sense to buy the option to "play" the volatility. But, you know, good luck with that.

 

VRX the textbook example of rational actors and efficient market hypothesis...

[TheAiGuy]

Not to step into an argument, but I can see the options as a smart way to play with vol. The issue would be whether there is a mispricing of vol, which I could see on the calls, but whether that means you should feel comfortable buying is a different story.

 

Supposedly, the volatility is embedded in the price. Supposedly.

 

I admit, that's pretty weak and you could easily imagine a scenario in which you don't believe the volatility is embedded in the options price and you believe delta is underpriced, for example, in which case it would make sense to buy the option to "play" the volatility. But, you know, good luck with that.

 

VRX the textbook example of rational actors and efficient market hypothesis...

 

Ha ha ha, fair

[Guest Schwab711]

Valeant expects to file its Form 10-K and become current on its financial filings by April 29, 2016 (within the curing period) but to be prudent, the company also announced that it intends to seek a waiver from the lenders under its credit facility. The waiver that the company is seeking will include a request to extend the deadline to file its Form 10-K for December 31, 2015 and the deadline to file its Form 10-Q for the quarter ended March 31, 2016.

 

From today's 8-k.  Picasso pointed this out, so hat tip to him.  If they were going to be able to file by April 29, there is no need for a costly waiver, so I doubt it occurs before then....

 

I just don't know how anyone is able to "invest" in this company.  They are basically saying that they have been cooking the books and the CFO says, Nah, it was the controller, not me. 

 

To hang your hat on ebitda numbers from B+L presumes that those are correct.  If you are a buyer, what are you going to pay for a company whose numbers you can't trust and whose sales force has been pillaged.

 

Yeah, there is some other funny business going on. 

 

How does the CFO blame the Controller for how the Philador accounting was booked?  That's one of the most absurd things the CFO could have said.  The Controller reports to the CFO, and the CFO ultimately signs off on the accounting, including treatment of how revenues are booked and any adjustments.

 

There is obviously real cash flow underneath the hood, but what else in the accounting may need restatement?  Anyone investing in Valeant is not making a binary bet...it's a speculative bet that the amount of fraud is limited.  Cheers!

 

Talk about throwing someone under the bus...

[Picasso]

And let us just ignore the fact the guy they threw under the bus for accounting fraud was just the interim CEO. Like seriously, I would love to be a fly on the wall during these board meetings. He was probably busy buying up paper shredders at the local Staples during his two month stint as commander in chief.

[thefatbaboon]

Valeant expects to file its Form 10-K and become current on its financial filings by April 29, 2016 (within the curing period) but to be prudent, the company also announced that it intends to seek a waiver from the lenders under its credit facility. The waiver that the company is seeking will include a request to extend the deadline to file its Form 10-K for December 31, 2015 and the deadline to file its Form 10-Q for the quarter ended March 31, 2016.

 

From today's 8-k.  Picasso pointed this out, so hat tip to him.  If they were going to be able to file by April 29, there is no need for a costly waiver, so I doubt it occurs before then....

 

I just don't know how anyone is able to "invest" in this company.  They are basically saying that they have been cooking the books and the CFO says, Nah, it was the controller, not me. 

 

To hang your hat on ebitda numbers from B+L presumes that those are correct.  If you are a buyer, what are you going to pay for a company whose numbers you can't trust and whose sales force has been pillaged.

 

Yeah, there is some other funny business going on. 

 

How does the CFO blame the Controller for how the Philador accounting was booked?  That's one of the most absurd things the CFO could have said.  The Controller reports to the CFO, and the CFO ultimately signs off on the accounting, including treatment of how revenues are booked and any adjustments.

 

There is obviously real cash flow underneath the hood, but what else in the accounting may need restatement?  Anyone investing in Valeant is not making a binary bet...it's a speculative bet that the amount of fraud is limited.  Cheers!

 

Haven't they just reconfirmed that the only problem is still this rev recognition issue?  Not sure what we learn in this release other than good news honestly.  We have know the shifty Philidor structure for months now. We have also known about the few cents that more properly ought to have been booked in 14 instead of 15.

 

And regarding the cfo I'm not surprised he doesn't want to be hung for this, assuming of course there is nothing else. The sin in Philidor was the weasely overall legal structure. Having gone there and used this structure, which I assume was not a Schiller creation, deciding whether to consolidate or not in q4 2014, with its trivial effects either y way, is almost totally economical irrelevant. And he didn't blame the comptroller. He said it was the compt's decision AND that he agreed with it.  Personally  I can understand the logic of what they did from an accounting point of view, too. 

 

Have no horse in this race but if I were long id be cautiously relieved that the release seems to reconfirm that all there is is this small Philidor Rev issue to restate. Quite amazing actually.

 

Give me a hard working ad hoc committee, a terrified audit team and 6 months and I'd guess I'd find worse issues in many large international companies.  Not surprised the stock rallied today.  Just my two cents.

[Parsad]

Valeant expects to file its Form 10-K and become current on its financial filings by April 29, 2016 (within the curing period) but to be prudent, the company also announced that it intends to seek a waiver from the lenders under its credit facility. The waiver that the company is seeking will include a request to extend the deadline to file its Form 10-K for December 31, 2015 and the deadline to file its Form 10-Q for the quarter ended March 31, 2016.

 

From today's 8-k.  Picasso pointed this out, so hat tip to him.  If they were going to be able to file by April 29, there is no need for a costly waiver, so I doubt it occurs before then....

 

I just don't know how anyone is able to "invest" in this company.  They are basically saying that they have been cooking the books and the CFO says, Nah, it was the controller, not me. 

 

To hang your hat on ebitda numbers from B+L presumes that those are correct.  If you are a buyer, what are you going to pay for a company whose numbers you can't trust and whose sales force has been pillaged.

 

Yeah, there is some other funny business going on. 

 

How does the CFO blame the Controller for how the Philador accounting was booked?  That's one of the most absurd things the CFO could have said.  The Controller reports to the CFO, and the CFO ultimately signs off on the accounting, including treatment of how revenues are booked and any adjustments.

 

There is obviously real cash flow underneath the hood, but what else in the accounting may need restatement?  Anyone investing in Valeant is not making a binary bet...it's a speculative bet that the amount of fraud is limited.  Cheers!

 

Haven't they just reconfirmed that the only problem is still this rev recognition issue?  Not sure what we learn in this release other than good news honestly.  We have know the shifty Philidor structure for months now. We have also known about the few cents that more properly ought to have been booked in 14 instead of 15.

 

And regarding the cfo I'm not surprised he doesn't want to be hung for this, assuming of course there is nothing else. The sin in Philidor was the weasely overall legal structure. Having gone there and used this structure, which I assume was not a Schiller creation, deciding whether to consolidate or not in q4 2014, with its trivial effects either y way, is almost totally economical irrelevant. And he didn't blame the comptroller. He said it was the compt's decision AND that he agreed with it.  Personally  I can understand the logic of what they did from an accounting point of view, too. 

 

Have no horse in this race but if I were long id be cautiously relieved that the release seems to reconfirm that all there is is this small Philidor Rev issue to restate. Quite amazing actually.

 

Give me a hard working ad hoc committee, a terrified audit team and 6 months and I'd guess I'd find worse issues in many large international companies.  Not surprised the stock rallied today.  Just my two cents.

 

I respectfully disagree with your view that he did not throw the Controller under the bus.  Here is his quote:

 

"The Philidor sales transactions in Q4 2014, and the subsequent accounting treatment, was the result of a careful and reasoned accounting decision made by the Company’s Corporate Controller based on what she considered to be complete and accurate facts, <b>and I was told by the Corporate Controller</b> that the outside auditors reviewed the transactions in question. The accounting decision was not my decision, but I was advised of the decision and the rationale behind the decision by the Corporate Controller, and I agreed with the decision. The now-former Corporate Controller was incredibly experienced, she was trusted and respected by the Audit and Risk Committee, and she consistently received among the highest employee rankings inside the Company and strong support from the Company’s outside auditors."

 

According to his own statement, he simply accepted the word of the Controller that the auditors had signed off on the Philador revenue recognition.  This indicates that he wasn't doing his job properly.  This wasn't some immaterial $50K receivable!  We're talking about one of their largest sources of revenue and how it was accounted.  He doesn't have any backup from the auditors indicating that they were treating this correctly based on US GAAP?  And if he does have backup, the blame certainly leads to the next party responsible...the auditors.  This wasn't some new one-time transaction.  They bear as much blame as the CFO if they approved the transaction!  After that, the Audit and Risk Committee should be held responsible and the CEO.  The last party I would blame would be the Controller.  Cheers!

[muscleman]

Muscleman, can you let us know what your friend's next move will be so we can clone him?

 

Thanks in advance.

 

About valeant, a small shift in perception is all it took for the business model to fall.  This really was a house of cards. 

 

Ackman coming in did not help.  In hindsight, putting valeant in the spotlight increased the reputational risk which put the business model at risk. 

 

Sorry. I don't think it is appropriate to disclose a day trader's moves, mainly due to the time frame of the moves.

I still learned a lot from him as a value investor. Last year he warned me that he observed serious herd like behaviors on this board, and that helped me a lot.

 

Always be careful of following the herd, even if the herd leaders are Bill Ackman, Bruce Berkowitz, Eddie Lampert and Jeff Ubben.  :) (And a few hero members on this board  ;D)

[Guest roark33]

Valeant expects to file its Form 10-K and become current on its financial filings by April 29, 2016 (within the curing period) but to be prudent, the company also announced that it intends to seek a waiver from the lenders under its credit facility. The waiver that the company is seeking will include a request to extend the deadline to file its Form 10-K for December 31, 2015 and the deadline to file its Form 10-Q for the quarter ended March 31, 2016.

 

From today's 8-k.  Picasso pointed this out, so hat tip to him.  If they were going to be able to file by April 29, there is no need for a costly waiver, so I doubt it occurs before then....

 

I just don't know how anyone is able to "invest" in this company.  They are basically saying that they have been cooking the books and the CFO says, Nah, it was the controller, not me. 

 

To hang your hat on ebitda numbers from B+L presumes that those are correct.  If you are a buyer, what are you going to pay for a company whose numbers you can't trust and whose sales force has been pillaged.

 

Yeah, there is some other funny business going on. 

 

How does the CFO blame the Controller for how the Philador accounting was booked?  That's one of the most absurd things the CFO could have said.  The Controller reports to the CFO, and the CFO ultimately signs off on the accounting, including treatment of how revenues are booked and any adjustments.

 

There is obviously real cash flow underneath the hood, but what else in the accounting may need restatement?  Anyone investing in Valeant is not making a binary bet...it's a speculative bet that the amount of fraud is limited.  Cheers!

 

Haven't they just reconfirmed that the only problem is still this rev recognition issue?  Not sure what we learn in this release other than good news honestly.  We have know the shifty Philidor structure for months now. We have also known about the few cents that more properly ought to have been booked in 14 instead of 15.

 

And regarding the cfo I'm not surprised he doesn't want to be hung for this, assuming of course there is nothing else. The sin in Philidor was the weasely overall legal structure. Having gone there and used this structure, which I assume was not a Schiller creation, deciding whether to consolidate or not in q4 2014, with its trivial effects either y way, is almost totally economical irrelevant. And he didn't blame the comptroller. He said it was the compt's decision AND that he agreed with it.  Personally  I can understand the logic of what they did from an accounting point of view, too. 

 

Have no horse in this race but if I were long id be cautiously relieved that the release seems to reconfirm that all there is is this small Philidor Rev issue to restate. Quite amazing actually.

 

Give me a hard working ad hoc committee, a terrified audit team and 6 months and I'd guess I'd find worse issues in many large international companies.  Not surprised the stock rallied today.  Just my two cents.

 

If people really think this is just a minor $58m revenue recognition timing issue, I think they are missing the much bigger picture.  If that's the only issue, I must ask a simple question, why go out and get a waiver of default for potentially not being able to file by April 29?  The $58m issue is just peanuts...

[VersaillesinNY]

This story never ceases to surprise me:

 

Sequoia is already booking a Tax loss:

http://finance.yahoo.com/news/sequoia-fund-sold-1-5-002123572.html

 

While Bill Ackman is running his P&R campaign:

 

"Valeant’s problems -- where a relatively minor accounting issue snowballed into a massive crisis -- was reputational, not operational, and would be repaired, the men [Pearson & Ackman] told employees."

 

http://www.bloomberg.com/news/articles/2016-03-22/ackman-said-to-address-valeant-workers-side-by-side-with-pearson

 

The show is turning into a soap opera which is sad for VRX employees and shareholders.

 

Diclosure: I have a small position in VRX purchased at an average price of $79, so still in the red.