UPDATE 1-Ackman's fund sells 5 mln Valeant shares to generate tax loss

(Adds details on investment, background on fund)
By Svea Herbst-Bayliss
BOSTON, Dec 31 (Reuters) - Billionaire investor William
Ackman said on Thursday he sold about 5 million shares in drug
company Valeant International VRX.TO in order to generate a
tax loss as investors in his Pershing Square (N:SQ) Capital Management
face the biggest loss in the company's history.
Ackman's hedge fund now owns 29.1 million shares in Valeant,
or 8.5 percent of the company, down from 34.1 million shares, or
9.9 percent, according to a regulatory filing made after the
market closed on Thursday, the last trading day of 2015.
Pershing Square sold shares in its two on-shore portfolios
in order to generate a tax loss for investors while the two
off-shore portfolios did not sell any shares, the filing said.
News that Ackman, one of Valeant's biggest and most vocal
backers, sold some of his shares comes at the tail end of a
tumultuous year for the Canadian pharmaceutical company, whose
share price had surged and then plummeted amid questions about
its drug pricing and accounting practices.
The company, after disclosing last week that its chief
executive officer, Michael Pearson (L:PSON), had been hospitalized with
severe pneumonia, this week named a trio of company executives
to take over until Pearson returns.
Ackman was not available to comment, and a company spokesman
declined to say anything beyond the filing.
For Ackman, 2015 is sure to be one of his worst years ever,
in part because of the heavy losses in Valeant. One of Ackman's
funds posted a 19.7 percent loss through Dec. 29. Final
calculations for all of the firm's funds have not been made.
The results mark a dramatic about face from last year's 40
percent gain, which ranked Ackman among the hedge fund
industry's best performers. The 2014 gain was fueled mainly by
an increase in drug company Allergan's shares as Ackman
pressured it to sell itself to Valeant.
Allergan (N:AGN_pa) sold itself to Actavis (N:AGN) instead and in March of
2015, Ackman said he had made a sizable bet in Valeant.
But by late August, Valeant had gone from being one of
Ackman's biggest winners to being his largest loser, costing him
and his investors, including state pension funds, billions in
losses.
While Ackman criticized Valeant for having a public
relations problem, the activist investor stuck by the company,
upping his stake significantly.
Valeant's shares closed the year down 22 percent, at
$101.67, at less than half the year's high of $260 reached in
early August.