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https://finance.yahoo.com/news/valeant-announces-ceo-success...

Ackman on board, still no 10K. The story goes on....


sw
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Company accusing former CFO of "improper conduct".


sw
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Company accusing former CFO of "improper conduct".


Yes. It looks like Ackman is going to clean house. They indirectly attribute this 'improper conduct' to "certain concerns related to those items with respect to the tone of the organization", and more specifically, " the performance-based environment at the company, where challenging targets were set and achieving those targets was a key performance expectation, may have been contributing factors resulting in the company's improper revenue recognition". (Quotes from today's PR.)

Reading between the lines, they seem to think that about $50m of Phildor revenue was recognized in late 2014 when it should have been recognized only in early 2015, perhaps to meet earnings targets so that management incentives would me maximized.

As for fixing this, "certain remediation actions have been recommended and are being implemented by the company, including placing the company's former Corporate Controller on administrative leave." These would include reviewing executives' compensation, where bonuses were obtained by the faulty reporting, and giving the boot to the CEO and CFO, and, presumably, revising the way they report revenue and, hopefully, earnings.

All in all, I think this is a good development for Valeant, and if it makes it more likely that they divest some assets, there may be reasonable returns going forward, although they will not come anywhere close to their previous valuation in the foreseeable future.

Regards, DTB
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If they do some divestitures it would be very interesting to see if they get more/less than what they paid. The comparisons may not be easy since they are likely to just sell of parts not whole companies.

sw
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Well, for B+L there's no doubt they'd get more than they paid. But as you note may be hard to tell if done piecemeal.

Pearson's firing is a good first step. Getting the new CEO & filing by April 29 are the next 2 key steps.
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Bought $30 call and sold $32.5 for net debit of $1 for May 20 strike; I believe there is a higher chance the company will file by April 30; If not the option will expire worthless :)
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Why do you think there is no doubt they would get more for B&L than they paid?

Have they ever disclosed actual numbers for B&L anywhere? Looking through a bunch of their presentations, financial statements, and earnings releases, I do not see anything. I see a few mentions of an organic growth number q-o-q and y-o-y, but it is in a vacuum without the baseline numbers. Thanks.
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My sources say they over paid for B&L by 10-20%, some good assets but not clear they are not damaged to some extent so they might get less.

sw
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still no 10K

From company's press release

"The company is in the process of restating the affected financial statements and the restated financial statements will be included in the company's Annual Report on Form 10-K for the year ended December 31, 2015 , which the company intends to file with the Securities and Exchange Commission and the Canadian Securities Regulators on or before April 29, 2016 "

Wells Fargo in a research note opines:
"we want to know how many lawsuits and investigations there are
and specifically what the SEC is investigating; recent WSJ article
highlights a concern we raised before – the high level of
intangibles; we wonder if the 2015 10-K will also disclose asset
write-downs
"

I believe the company will file by April 29th.

Looks like the company has very limited debt maturities until 2020, again from WFC research report:

2016 - $276m, 2017 - 0, 2018 - $3467m, 2019 - $1920m, assuming $3 B FCF for 2017 to 2019, the company will have sufficient cash flow + cash on hand to service debt maturities. By 2020, hopefully most of this is in distant memory and the company should be able to roll over debt.

So the question is, are there any more shoe's to drop. If not, just the fact they filed their 10-k should push the stock to jump from current levels.

I have a small speculative call spread. I am treating it as binary options.
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I think the stock will rally after they file as well. Given the support of VRX by JPM and Barclays CEOs, I don't think BK is a realistic concern. If they can't pay off all their maturities, they will be rolled over, just at a higher rate.

No way banks kill off the golden goose, especially with $Billions of divestitures coming up.
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some bullish comments...

1) no additional accounting misstatements were found following completion of the internal ad hoc review, 2) Valeant committed to filing its 10-K by 4/29/16, and 3) creditors and bondholders agreed to extend or waive technical covenants related to reporting deadlines. At this time, it’s worth reminding investors of the significant brand value of its multiple franchises, as well as the steady demand of its key products to date. Our initial Sum of the Parts analysis derived an equity value of $65/share, but a deeper SOTP can yield up to $90-95/share in equity value, confirming again that current levels do not accurately reflect this asset value. With liquidity to satisfy debt obligations, obviating the need for forced asset sales, we do not believe Valeant should not be trading at distressed levels


http://blogs.barrons.com/stockstowatchtoday/2016/04/11/valea...
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Our initial Sum of the Parts analysis derived an equity value of $65/share, but a deeper SOTP can yield up to $90-95/share in equity value, confirming again that current levels do not accurately reflect this asset value. With liquidity to satisfy debt obligations, obviating the need for forced asset sales, we do not believe Valeant should not be trading at distressed levels


It looks like they put one too many negatives in that last line.

More importantly, there is a contradiction between what they say here and a prior analysis.

Here: Our initial Sum of the Parts analysis derived an equity value of $65/share, but a deeper SOTP can yield up to $90-95/share in equity value, confirming again that current levels do not accurately reflect this asset value


But if you click on the hyperlink that 'Sum of the Parts analysis' is connected to, it takes you to a SOTP analysis from Deutsche Bank that says this:

Un-rolling the roll-up doesn’t point to upside Valeant has spent an estimated $41bn+ on deals since 2008; a theoretical scenario in which the company recouped this investment yields an equity value of $30/share. A scenario in which Valeant sold its assets for 10% less than the $41bn+ spent yields an equity value of $18/share. A sum-of-the-parts analysis based on multiples that Valeant paid for various assets (a potentially overly generous approach) yields an equity value of $36/share.


It looks like this is just Barron's mistake; they sent us to the pessimistic DB initial SOTP ($18-$36 /share), not the optimistic Stifel SOTP ($65-$95 /share).

Regards, DTB
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