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.


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 He told me his wife was looking.

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


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