Short-seller Citron Research compares Valeant Pharmaceuticals to Enron
A November 2015 Reuters/CNBC article on the latter’s website focused on the top executive of the firm behind a scathing report that sparked intense scrutiny of Valeant Pharmaceuticals. But he now wants to take himself out of the story so investors will focus on the drugmaker.
Andrew Left, Executive Editor of short-selling research firm Citron Research, told the news site that he stood by his criticism of Valeant’s business model but decided not to make new claims in order to shift attention away from Citron’s position.
“The focus of the story should be on Valeant,” Left told CNBC. “This story has a life of its own.”
Reuters/CNBC said Citron published a report on Valeant in October, alleging accounting improprieties at Valeant involving a network of specialty pharmacies that the company had never disclosed to investors. That sent the stock down as much as 40 percent in one session.
But in a later report, Citron said, “While Citron has been at the nexus of information on this story, we will not be releasing new allegations against Valeant in this piece, as we believe that it is not our responsibility to be the judge, jury and executioner of the company’s deeds.”
Nevertheless, it’s more than a little amusing to see these Big Pharma and Wall Street players pointing fingers at each other over improprieties.
Left is among a small group of short-sellers who publish free reports on firms they claim are overvalued or are engaged in fraud. In the October report, he likened Valeant to Enron, and stood by that comparison in CNBC’s follow-up.
“On Friday, October 30, while billionaire investor William Ackman was hosting a four-hour conference call defending his position in Valeant, Citron Research tweeted that it was going to release an explosive report on the embattled drug giant on Monday [November 2],” said the Reuters/CNBC piece.
The business news site quoted another Citron tweet: “$VRX [Valeant’s stock price] has a better chance of going to 0 than $HLF [Herbalife’s stock price] ever will.” Citron also added that the story was “dirtier than anyone has reported.”
On Monday, Left stressed his criticism was not directed at Ackman, saying, “This is about Valeant.”
A Valeant spokeswoman was also quoted: “Citron admits in its latest report that it has no substantiation for further allegations against Valeant.”
“Given that its last report was filled with demonstrably false statements about our business, we are not surprised, even as Citron continues to mislead investors in an attempt to profit by driving down our stock,” the statement added.
Meanwhile, for that very reason, Valeant CEO J. Michael Pearson has asked the SEC to investigate Citron’s activities, says CNBC.
For its part, Citron said in Monday’s report: “Our work is done here. We are looking forward to moving on to new stories. If only every story Citron wrote about received one-tenth of the attention of Valeant, the market would be a different place.”
On the Friday morning ahead of Ackman’s marathon conference call, Valeant said it had severed ties with Philidor RX, its consolidated specialty pharmacy business, after losing confidence in the division’s operating practices.
Like dogs fighting over scraps.