Hedge fund manager Bill Ackman.
Photograph by David A.Grogan—CNBC/NBCU/Photo Bank via Getty Images
By Stephen Gandel
October 30, 2015

Bill Ackman is convinced that even if Valeant broke the law and has to pay a big fine, it will survive.

“Life will go on for Valeant,” Ackman said.

On Friday morning, the usually uber-confident hedge fund manager held a conference call defending his investment in Valeant (VRX). But if Ackman’s point was to reassure investors that the troubled drug company—whose shares have dropped by more than 60% in the past month—is a good investment, he failed miserably. Shares of Valeant slid another 4% on Friday, to $107. Valeant said it was cutting ties to Philidor and that the pharmacy company would shut down immediately.

At one point in the conference call, Ackman had one of his lawyers run through the various ways a drug company like Valeant can break the law. He also listed all of the big fines that drug companies have paid in the past. Valeant has not admitted to any wrongdoing, and Ackman did not directly accuse the company of any misbehavior. Nevertheless, the call didn’t come off as a ringing endorsement of Valeant.

During the conference call, Ackman came off as seemingly unaware of what was going on at Valeant, which, as of the second quarter, was his fund’s largest investment. Ackman said he was aware of Philidor, but, like other investors, did not find out until last week that Valeant had spent $100 million on an option to acquire the company. He said he pressed a Valeant board member on why it hadn’t been disclosed earlier, but didn’t get much of an answer. He spent a good deal of the conference call recounting the controversy surrounding Valeant. But at times it seemed to come off as if he was the one that needed to get up to speed on the company.

Ackman said he was sticking with his investment in Valeant. He said the shares were cheap and could rise to $306, which would be nearly tripling from where it is now. But Ackman used Valeant’s measure of cash EPS to get to that assessment. Some have questioned whether that measure overestimates the company’s earnings. Bottom line: As long as you don’t mind investing in a company that was hiding problems from its biggest shareholder, Valeant’s shares are cheap.

Toward the end of the call, Ackman recounted a story about Warren Buffett and how he invested in American Express following a scandal there in 1963. No.1 crisis management tactic on Wall Street: When in real trouble, compare yourself to Buffett.

Bill Ackman spent Friday morning trying to defend his investment in Valeant. In doing so, he raised questions about another investment: one in Ackman’s own fund, Pershing Square.

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