By Alexandra Stevenson
IT is rare that William A. Ackman, the brash activist investor, apologizes for anything. As a successful hedge fund manager, Ackman has made billions of dollars for himself and his investors with bold and counterintuitive bets.
But recently he conceded that his firm’s biggest wager yet—on Valeant Pharmaceuticals International—was “a huge mistake” that has cost his hedge fund firm, Pershing Square Capital Management, “a tremendous amount.”
“I deeply and profoundly apologize,” Ackman added in an annual letter to investors.
Ackman staked his own reputation on Valeant even as the company faced steep challenges and regulatory scrutiny for its aggressive pricing tactics. He went to bat for Valeant when its executives were questioned during a Senate hearing. He loaded up on the stock when everyone else was selling.
But the investment in Valeant ultimately led Pershing Square to double-digit percentage losses for two years in a row. After reaching a high of $257 a share in mid-2015, Valeant’s share price plunged to $12.11 a share on March 13. That was the day when Ackman finally decided to throw in the towel and sell his firm’s entire stake in Valeant, resulting in a $4-billion loss.
In his annual letter to investors, Ackman took the blame for the bad bet, acknowledging that the investment had “damaged the record of success of our firm.”
“My approach to mistakes is that I personally assume 100 percent of the responsibility on behalf of the firm while sharing the credit for our success,” he added.
Ackman also threw a jab at the very same Valeant executives he once praised.
“In retrospect, we misjudged the prior management team, and this contributed to our loss,” he said.
In a separate letter, the board of Pershing Square Holdings, a publicly traded version of Ackman’s hedge fund, reaffirmed its support for Ackman.
“The lessons learned from the investment have been discussed at length in prior communications,” Anne Farlow, the board’s chairwoman, wrote in the letter.
By the end of last year, Pershing’s stake in Valeant had lost 19.2 percent of its value, contributing to the firm’s overall loss of 13.5 percent for 2016. In 2015, Pershing Square Holdings lost investors 20.5 percent.
© 2017 The New York Times
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