Skip to main content

Valeant Pharm: A Heavily Indebted Company

Image result for valeant logo

Valeant Pharmaceuticals has taken some hits of late. At the end of March 14, a share of VRX at the NYSE would bring you $69.04. At the end of the following day, it was worth less than half of that, just $33.51. It has lost further ground since. What happened? Management had announced disappointing earnings figures, and  cautioned that its debt holders could categorize it as in default if it missed an April 30th filing deadline.

A week later, the bond rater Moody's downgraded Valeant, on the grounds that its cash stockpile was inadequate to its overall indebtedness.

Meanwhile, as the departure of J. Michael Pearson, the long-time CEO, approached, shareholders naturally got nervous. They were nervous, that is, because always creates a case of the nerves in someone, often in many people. They weren't nervous as a recognition of Pearson's great leadership. Indeed, he had run up a heck of a lot of debt on acquisitions, some of which at least were of dubious value to the company.

Joseph Papa, formerly of Perrigo, formally replaced Pearson on Monday, May 2.

On May 16, Bloomberg reported that one renowned hedge fund, Jana Partners, well regarded partly as a consequence of its campaigns to change policies at ConAgra Foods and Computer Sciences Corp., had sold its (considerable) holdings in Valeant in the first quarter.

Some commenters were by this time predicting that Valeant's stock was headed to zero. It hasn't gotten any lower than $23.55 though.

Just yesterday, Reuters reported on several letters the SEC has sent Valeant expressing concern about its non-GAAP accounting. For those not in these weeds, GAAP stands for "generally accepted accounting practices." Non-GAAP practices, then, are the not-so-accepted ones.  On the day this became public knowledge, oddly, the stock price went up. At the end of trading Wednesday it was at $27.13.

How much trouble is it in? Or, looking at the glass half full: Could it get back to the $70 neighborhood?


Popular posts from this blog

Great Chain of Being

One of the points that Lovejoy makes in the book of that title I mentioned last week is the importance, in the Neo-Platonist conceptions and in the later development of the "chain of being" metaphor, of what he calls the principle of plenitude. This is the underlying notion that everything that can exist must exist, that creation would not be possible at all were it to leave gaps.

The value of this idea for a certain type of theodicy is clear enough.

This caused theological difficulties when these ideas were absorbed into Christianity.  I'll quote a bit of what Lovejoy has to say about those difficulties:

"For that conception, when taken over into Christianity, had to be accommodated to very different principles, drawn from other sources, which forbade its literal interpretation; to carry it through to what seemed to be its necessary implications was to be sure of falling into one theological pitfall or another."

The big pitfalls were: determinism on the on…

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge.

We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a majestic wate…