Ackman lecture no match for Citron tweet as Valeant tumbles anew

By Svea Herbst-Bayliss
BOSTON, Oct 30 (Reuters) - Hedge fund billionaire William
Ackman spent nearly four hours on Friday trying to convince the
world that drug maker Valeant was a good buy but it was
short-seller Andrew Left's tweet promising fresh allegations
about the Canadian company that got noticed.
By the end of trading, Valeant's stock price had tumbled
nearly 16 percent to $93.81, wiping $6.2 billion off its market
capitalization and taking Ackman's own losses on the company to
roughly $2 billion.
Left's accusation last week that Valeant was using its ties
with specialty pharmacy groups to artificially boost its sales,
a charge the company has denied, has sent the stock into a
tailspin and is turning 2015 into a very difficult year for
prominent hedge funds such as Ackman's Pershing Square Capital
Management and John Paulson's Paulson & Co.
Left, who runs Citron Research from Los Angeles, said he
would update his Valeant allegations on Monday, pledging that
the story would be "dirtier than anyone has reported."
Ackman, meanwhile, toiled in vain in the company's defense
in a specially convened conference call.
The New York-based hedge fund manager blamed bad public
relations and naive investors for Valeant's predicament saying
the company should have responded more vigorously to concerns
about its ties to specialty pharmacies.
Ackman, whose fund is the second-largest investor in
Valeant, pledged to stand by the company's chief executive
officer, Michael Pearson (L:PSON), saying "stuff happens" even with
reputable companies.
Left, however, is unconvinced.
"The market is telling you 'we don't know what is true and
what is not true and we don't want to play anymore'," he said,
shortly before heading out with his young daughter for some
early Halloween celebrations.
Left said he first started digging into Valeant just a few
weeks ago when Martin Shkreli, the 32-year old founder of two
drug companies, was vilified after raising the price of a
recently-purchased AIDS and cancer drug, Daraprim, from $13.50
to $750 a tablet.
The short-seller knew of Valeant from watching business news
channel CNBC and its sharp stock price gain prompted him to
spend a few hours digging on the Internet, research that formed
the basis for the report he issued last week.
Left, who profits from betting his own money that company
shares will fall, has declined to say when exactly he bet
against Valeant or how big his position is. He has said only
that it was made weeks ago.
Ackman has criticized him for failing to provide these
details, noting that he was far more candid on his own short bet
against nutrition firm Herbalife (N:HLF) HLF.N , which he put on nearly
three years ago and is hurting him as the stock is up 48.65
percent this year alone.
But so far it seems that Left and other short-sellers
including Kynikos Associates Jim Chanos and Australian hedge
fund manager John Hempton are getting rich on Valeant's sharp
loss as the stock has tumbled 47 percent in the last month.
Left tweeted on Friday that Valeant shares had a better
chance of going to zero than Herbalife.
Indeed, the Valeant slide could translate into deep pain for
smaller hedge funds that have a few million dollars under
management but own enough Valeant stock to make up about one
fifth of their portfolios. Glenn Greenberg's $3.3 billion Brave
Warrior, for example has invested 36 percent of his assets in
Valeant.
Ackman's fund was off roughly 16 percent for the year before
adding in today's losses, a sharp reversal from last year's 40
percent gain.
Left said he did not take any pleasure in seeing smaller
funds suffer but said they could have taken corrective action
long ago after the stock had surged. "I hope these small funds
aren't mad at me," he said.