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Mar 16, 2017

S3 BLACKLIGHT: VRX Short Sellers Up $2.8 billion since August 2015

Bill Ackman of Pershing Square Capital sold his 27.2 million shares of Valeant Pharmaceuticals at $11.10/$11.40 this week. It has been reported that Pershing Square lost between $2.8 billion to $4.0 billion on their VRX long position that they began accumulating in 2015.

On the positive side of the ledger are the short sellers who began shorting VRX stock in earnest in the second half of 2015, after VRX hit its historic high of $262.52 on August 5th, 2015.

VRX short sellers were profitable every year after Bill Ackman’s entry into the stock, eventually earning a 343.45% return on their average short position of $801 million. 

Short sellers may start exiting their positions with Pershing Square’s stock sales already having pushed VRX’s stock price to year-to-date lows. But they might be waiting for the other shoe to drop, with the possibility that John Paulson, of Paulson & Co, will sell his 19.4 million share stake in VRX after Bill Ackman’s recent exit. With short interest at $572 million, and falling, each $1 drop in VRX’s stock price equates to approximately $50 million in profit. Bill Ackman’s stock sale pushed down VRX’s stock price by $1.22. Will short sellers take the risk of waiting for Paulson to sell his stock, pushing VRX’s price down even further and earn another $60 million, or close out their positions and realize more of the $2.8 billion in profits they have already earned?

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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