Companies used to build things. Not because they were noble, but because they had no other choice. Selling snake oil simply wasn't possible on a large scale, for a long time; in the previous economy. Now, like during the dot com boom, all you need is a phone, a website, and a power point machine. Actual sales, or an actual product, it's so 80's.
Today shares for VRX "Valeant" Pharmaceuticals was haled 4 TIMES: [3]
Valeant is using “a network of phantom captive pharmacies” connected to Philidor, with the same management and phone numbers, to create false sales and avoid auditor scrutiny, Citron alleged in its report.
Valeant has released a statement [4] responding to the allegations, noting that Philidor provides back-end services to and shares a call center with the “phantom” pharmacies such as R&O Pharmacy that Citron referenced. Shipments to pharmacies in Philidor’s network are not recorded in the company’s revenue, and inventory at these pharmacies is not included in consolidated inventory balance, according to the statement.
But the good news for investors, this will make a monumental class action lawsuit, which are already starting to pile up from leading firms [5]. But this begs the question, are the markets going to be unwound in court? Will the final trade be in a courtroom - not on a trading floor?
How many more VRX are out there - hiding just under the noses of honest investors, in plain sight?
Or, is it the rules of the stock market, that 'force' companies to behave in such a way, in order to keep their past investors afloat?
Valeant Pharmaceuticals has been crushed by investors after short-selling research-firm Citron called it the "pharmaceutical Enron."
The stock fell 39% before Valeant called Citron's claims "erroneous." That stopped the bleeding, but the stock still fell 19% to close the day at around $118 per share. Just two months ago, the stock was trading above $250.
Citron alleged Valeant improperly benefited from a business relationship with Philidor, a pharmacy that distributes drugs for specialty pharmacies. Citron says Valeant filed fake invoices with Philidor to make its revenue appear greater than it is. Valeant is Philidor's only customer, Citron points out.
In a release Wednesday [4], Valeant said that Philidor is a legitimate distribution network through which Valeant sells some of its products.
At least if the stock market is moving to the courtroom, we can still trade Forex! [7]
And yes - of course there are companies that build things - but their stock is selling for much greater times than it should be, due to their use of free QE money and Goldman derivatives.