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
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