In yet another page of the activist investor’s sleaze book, last night Bill Ackman showed that when it comes to unethical way to generate “alpha” he truly may have no equal, when we learned that together with serial-acquirer and employee terminator Valeant, Ackman’s Pershing Square would join in on a debt-funded (thank you ZIRP) acquisition of botox maker Allergan. Nothing about that is odd. Where the story, however, would becomes a near-criminal farce if the US actually had a regulator which itself was not an agency designed to promote and reward criminality (in hopes of getting a job there as a kickback), is that as Valeant was preparing to announce its bid, Pershing Square – well aware of what was coming – was buying, and buying, and buying Valeant stock. Actually, Akman scratch that – Ackman bought almost no stock: in fact he only bought some $76 million in AGN stock in late February. The balance: all call options, accumulated on an almost daily basis through March all the way until April 21, the day the news was leaked.
Bloomberg explains:
Ackman began buying Allergan stock Feb. 25 and then in March switched to over-the-counter call options to accumulate his stake, regulatory filings show. A buying pause April 9 and 10 helped lower the price, before Ackman resumed in earnest April 11, according to two people familiar with the matter.
Valeant was interested in the unusual arrangement with Ackman because the hedge fund could amass more of Allergan’s shares before making a public disclosure, said a person familiar with the matter. The shares rallied the most since 2009 in the six days before the stake and bid were disclosed yesterday, soaring 22 percent, and trading volume last week approached the highest level in a year.
Why? Because Ackman had accumulated so many calls, it was in his interest at this point to leak the “news” about not his but Valeant’s involvement, which is always happy to trade off its balance sheet and future growth prospects in exchange for a pop in the stock price here and now, even if that means firing thousands of workers, and actually cutting back even more on the company’s own internal organic R&D spending.
