Back on April 22, we wrote an article titled “How Bill Ackman Scrambled To Acquire Over $3 Billion In Allergan Calls Knowing Valeant Would Submit A Bid” in which we presented the following chart:
… which showed how Bill Ackman had accumulated a massive 9.7% stake in AGN stock through call options, making him the largest stakeholder of the company.
What happened after this fervent accumulation spree, driven by Ackman’s advance knowledge that Valeant would submit a bid for Allergan, is that news was purposefully leaked that Ackman was about to activist on Allergan in a fight that has lasted for just under 4 months but is so for not going quite Ackman’s way with Allergan refusing to relent. The stock soared, and Ackman made a killing on his calls, allowing Pershing Square to return about 30% YTD, a fact which has prompted Bill Ackman to put his recent investing debacles with Herbalife and J.C.Penney behind him and boldly proclaim he is preparing to take his hedge fund public.
Our take on what Ackman did in collusion with Valenat was clear:
“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.
To be sure, Ackman has denied he frontran the Allergan announcement, saying he consulted countless lawyers among which even former SEC chief enforcer (and former Deutsche Bank compliance officer).
As NYT reported, “before leaping into this particular abyss he consulted, deliberately, with Robert Khuzami, the former head of enforcement at the S.E.C., who is now a $5 million-a-year-man at Kirkland & Ellis, the Wall Street law firm. Mr. Khuzami assured Mr. Ackman that buying nearly $4 billion of Allergan’s shares knowing that Valeant intended to start a hostile takeover at a premium to market did not violate the S.E.C.’s rule 10b5-1 about insider trading…. Indeed, the onetime regulator told Mr. Ackman that he was so sure of his legal advice that he would welcome his former S.E.C. colleagues to call him and discuss it with him.”
