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Bill Ackman Triples-Down On Valeant: Boosts Stake To 9.9% By Buying Calls, Selling Puts

Tyler Durden's picture




 

In the infamous words of Kenny Rogers, "you gotta know when to fold 'em," but in the case of Bill Ackman and his Pershing Square Fund's massive losing position in Valeant (19.47 million shares at average cost of $183.57 against today's $87.11 lows), he has decided to not just double-down, but triple-down by selling puts to fund calls and increase his stake in the company to 9.9% (or 34.12 million shares).

As the Press Statement notes,

Pershing Square Holdings, Ltd. Increases Position In Valeant Pharmaceuticals International

 

AMSTERDAM -- November 23, 2015

 

Regulatory News:

 

Pershing Square Capital Management, L.P., the investment manager for Pershing Square Holdings, Ltd. (ticker: PSH:NA) has updated its Schedule 13D with the United States Securities and Exchange Commission, disclosing  that various funds it manages increased their beneficial ownership of Valeant Pharmaceuticals International, Inc. (ticker: NYSE: VRX), to 9.9% of shares outstanding.

 

The Reporting Persons purchased for the accounts of the Pershing Square Funds a net amount of 2,144,618 shares of Common Stock and over-the-counter American-style call options referencing 12,500,000 shares of Common Stock for aggregate consideration of $475,461,812 (including commissions). In addition, the Reporting Persons sold for the accounts of the Pershing Square Funds over-the-counter European-style call options and over-the-counter European-style put options, each call and put referencing a total of 12,500,000 shares of Common Stock and received aggregate consideration of $168,966,200.

The actual trades:

Which translated into English means that he spent $475.5MM on calls for 12.5mm in stock, and offset this by selling puts for 12.5MM in stock for $169MM.

In other words, Ackman buys the collapse in size...

By buying calls, selling puts, Ackman is now syntehtically long 12.5MM Valeant shares at a fraction of the actual price: Ackman's cash cost per share equivalent was $24.5, confirming that he didn't even have the cash to buy the shares and thus had to leave himself considerably more exposed to time decay and, of course, another plunge in the stock which this time will lead to even bigger margin calls.

Which leaves him 'proxying' 34.12 million shares at an average cost of $113.76...

Although his exposure is dramatically non-linear should things not work out (and note he remains drastically underwater still even on this newly acquired position).

 

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Mon, 11/23/2015 - 18:44 | 6828960 katchum
katchum's picture

I'll buy some valeant, if it doesn't go up at least Bill will be broke.

Mon, 11/23/2015 - 18:53 | 6828994 junction
junction's picture

Ackman can't spend his millions in the prison commisary.

Mon, 11/23/2015 - 18:54 | 6828999 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Dead cat bounce forced by the short squeeze is over. One way to go is DOWN! Bill, you soon will be broke.

Mon, 11/23/2015 - 19:53 | 6829297 Money Counterfeiter
Money Counterfeiter's picture

Insider QEIV info?

Mon, 11/23/2015 - 20:24 | 6829400 Fredo Corleone
Fredo Corleone's picture

Tripling down on VRX.

This is a kamikaze run. Dangerous flying.

Mon, 11/23/2015 - 18:46 | 6828967 tomlamon
tomlamon's picture

That is a synthetic long not a collar ..

Mon, 11/23/2015 - 21:32 | 6829709 cheeseheader
cheeseheader's picture

Pardon, it's been a while; but long stock, long calls, short puts is a synthetic long?  Wouldn't triple long be a more apt disclosure?

Mon, 11/23/2015 - 18:46 | 6828972 Id fight Gandhi
Id fight Gandhi's picture

Always a sound investment to throw good money after bad.

Mon, 11/23/2015 - 18:51 | 6828983 Bay of Pigs
Bay of Pigs's picture

Bill, never go Full Retard.

Mon, 11/23/2015 - 19:09 | 6829073 Yen Cross
Yen Cross's picture

I'm thinking the same thing. I'm still working on the math, but basically it looks like he's running a 30% hedge.

 I'm not sure of the overall risk structure of his options. [ie; time risk decay] He definitely looks like he's gunning for some YTD profits.

Mon, 11/23/2015 - 19:04 | 6829056 ghostzapper
ghostzapper's picture

Adding more bullseyes to his body for the bears to really bury him.  

Mon, 11/23/2015 - 19:10 | 6829082 Amish Hacker
Amish Hacker's picture

Quadruple down, the classic Texas Hedge. Now let's see the hole card.

Mon, 11/23/2015 - 19:12 | 6829089 shantyman
shantyman's picture

Interesting, the guy is an arrogant ass....but a successful one....this is not the play of a desperate dumbass, remember this is a guy who specializes in trading inside information.....

Mon, 11/23/2015 - 19:20 | 6829128 ronin12
ronin12's picture

he sold $165 (covered) calls and bought $95 calls with some of the money. I think this shows how desperate he is, to recoup some of his losses.

Mon, 11/23/2015 - 19:25 | 6829159 Spungo
Spungo's picture

lol Moby Dick

Mon, 11/23/2015 - 21:45 | 6829754 El Hosel
El Hosel's picture

I'll take "Other peoples money" for minus 100 Million ... Alex

Mon, 11/23/2015 - 21:48 | 6829759 rapetrain
rapetrain's picture

This isn't his first rodeo. He's got very smart people working for him. Besides, it's in nobody's interest on Wall St for the stock to tank. The big money from pension and retirement funds is very sticky and could move in size, since they got the same very smart people working for them and see the same opportunity.

VRX at $140 by Christmas.

Tue, 11/24/2015 - 01:49 | 6830395 gregga777
gregga777's picture

I hope that all of the insurance plan benefit managers, including those for Federal and state government Medicare and Medicaid, band together to ban the purchase of prescription drugs from these Wall Street parasite rapists like Valeant, Concodia, Mallinkrodt and Horizon. Those four companies business models are based solely on acquiring and then raising drug prices by grossly criminal orders of magnitude. Let Bill Ackman quadruple-down, quintuple-down, and more, riding Valeant down to $0. I hope they all rot in hell along with their Wall Street parasite friends like Bill Ackman. They couldn't be in better company.

Tue, 11/24/2015 - 03:55 | 6830533 Angry Plant
Angry Plant's picture

So he put 3.6 billion in and lost over half of it and now he has dropped another 1.2 billion in. So far he has put just under 5 billion into the company where his total 5 billion investment is now worth 3 billion.

Dude is the new king of Chumps trying to bluff his way out of this but is likely to lose another billion as the smart money takes the chance he is offering to bail on this stock.

Wallstreet is looking more and more like your typical penny stock scam every day. 

Tue, 11/24/2015 - 08:40 | 6831152 CajunWon
CajunWon's picture

?Last-In First-Out accounting? Holds the previous/existing/losing shares through year-end.  But turns over the newly acquired shares and options at a profit before year-end. He's a hero! Especially if vrx rebounds in 2016. 

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