Monday, April 25, 2016

Valeant's new CEO

Joe Papa has just accepted appointment as CEO of Valeant.

a. I am glad my short is mostly - not entirely covered. Joe Papa is a fabulous appointment - far better than Valeant deserved.

b. Papa has his work cut out for him. Valeant deserves to go bankrupt - and will go bankrupt unless the goodwill of bond holders and pharmaceutical payers is forthcoming. If I were auditor I would still qualify the accounts with a "going concern" qualification.

Given the treatment of stakeholders it will be hard to earn and maintain goodwill from bond holders and pharmaceutical payers. Valeant owned Philidor which was a systematic attempt to defraud pharmaceutical payers. It will take a lot of work to settle all the litigation and to get the payers to continue to pay inflated prices for Valeant drugs.

Joe Papa is far more likely than anyone I can think of to earn the goodwill of payers and bondholders and thus save Valeant.

I still think Valeant will go to bankruptcy, but I am less sure about it.

Even if Valeant files bankruptcy Papa should logically remain CEO. He will run the business better than most alternative CEO candidates.

This does not mean that I think Valeant should race back towards $100. Survivability is a long way from generating enough profit to meaningfully dint that $32 billion debt load.

Still for once I am not unremittingly bearish this company.




John

And here you will get me to say something I did not think I would say. If Bill Ackman was responsible in part for convincing Mr Papa to take the job then Mr Ackman has done Valeant and his investors a great service.

Thursday, April 7, 2016

The great matrimonial housing short-squeeze

It's a fairly consistent view around our office that house prices are absurd in Sydney - and winning a Sydney property auction is not a route to security, rather a route to becoming an indentured servant to a bank.

Alas we have one staff member married a few years with an 18 month old son.

I caught him looking at realestate.com.au. He told me his wife was looking.

His tart comment: short-squeezes come in many forms.




John

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The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author.  In particular this blog is not directed for investment purposes at US Persons.