Legal mess push stocks for VRX lower. Threat to existence.

https://www-smarteranalyst-com.cdn.ampproject.org/c/s/www.smarteranalyst.com/2017/04/17/valeant-pharmaceuticals-intl-inc-vrx-legal-mess-existential-threat/amp/

 

Funny how MP is on their list of legal mess.

 

The hits just keep on coming. More folks are bailing on the stock. Horrible PR and poor sales. While they have kicked the debt can down the road, what is there to look forward to? When most stakeholders stop believing in the company, then it's time to move on.

 

This is old news. All these allegations will be tied up in the court system for years to come. Not going to impact current quarters.

 

There are a couple this year. Anthony Basille insider trading lawsuit that involves Ackman is one.

 

Old news, New news, Real news, Fake news... Whatever the fuck you want to call it. Your ship is sinking by the week. Might want to start looking for a life boat.

 

We will survive and flourish. This will all blow over.

 

you wish

 

Bill Ackman was saying the same type of shit for years. You can't honestly believe that this is all just something that will "blow over" like forgetting someone's birthday. Company has lost tens of billions. Even one billion dollars could buy several thousand Ferraris. That is how much money that is just for a reality check. No way without customer confidence, growth of existing assets with sales of some will VRX ever be even a mid cap company. The last year has proven my thesis. Mic drop.

 

Ackman dumped all of his shares for a reason. He was an insider, a board member, and isn't afraid to trade on privileged information. If he had any inkling that his investment was salvageable, then he would have stuck around. He probably didn't like the way that Papa was managing the company, all talk, no real action. He read all about Papa's incompetencies at Perrigo. He saw all the internal forecasts and budgets, and he didn't like any of it. If they could have sold an asset and got reasonable value out of it, and used the proceeds to pay down some debt, that would've been good action.

This is not really blowing over. It has been almost two years, and everybody's patience is wearing thin. It may take another two to five years just to calm everybody's fear. So, the ship continues to list.

 

Assman loved Papa, what the hell are you talking about? He talked PABA up like he was the Messiah! Goes to show you how much hot air he blew up everyone's ass!

 

He was also in a bromance with Pearson, so what's your point?

 

Why is there so much focus on our legal liabilities? The debt and ebitda are our measuring stick.

 

Our company has not set aside a provision for the alleged legal liabilities, since that would be an admission of guilt. While some of this uncertainty is baked into the price of the stock, it doesn't fully reflect the challenges ahead if we were to lose a major lawsuit where we will need to make a large payout. Luckily, our legal system is such where we can put off this litigious madness out two to five years. For example, if we lose a lawsuit that requires us to fork over $500m, it's cash that we may not have to make this payment, even if we appeal. Then we would have to dip into our line of credit again, which will tax our whole infrastructure to make regular business payments on time. If these combined lawsuits are in the billions, it just exasperates the issue when the next tranches of notes are coming due.

Most people are measuring the company based on top line, bottom line, cash flow and debt management. However, our reputation is still shoddy, management is still suspect, and the government is still scrutinizing the company, so the legal issues are just frosting on the cake.

Next question.

 

It seems like we are having daily 52 week lows. We have to hit a bottom at some point.

 

0 would be a good bottom

 

There really isn't a bottom. Just a level that investors are willing to pay. If they stop buying, then it all comes down.

 

Despite the current stock price making new lows every day, our company can continue to exist. If we reach a point in three years where we can't pay our obligations (debt, payroll, rent, raw material, etc.), we can file for Chapter 11 protection. In this scenario, all existing stock holders will be holding toilet paper. There will be a stay on all existing obligations, and all new obligations will be on short leashes. We'll probably ask the bank for a line of credit to float us until we get out of bankruptcy protection. A bankruptcy judge will determine how much the debtor parties will get based on the ability of the company to continue as an on-going concern. There's a good chance that any new stock issued will go to the debtors and some will be made available to the public. Look up Chrysler and GM Chapter 11 sagas.

If this happens, the board will probably re-issue RSU's and options to make all the C-Suite executives and themselves whole, while all others are SOL. Papa shouldn't get a new contract, since he was ineffective, but since it's the old boys club, the inept board will take care of him and his cronies. All those currently crying about the company's stock in the news are those who have lost money on investing in the current stock, probably some at lofty values north of 150. Ackman was one of these until he sold all his shares, but there were a lot that bought into Pearson's growth by acquisition business model using debt.

So, the lesson here is that the current stock paper is worth very little and the bond paper is probably worth about 0.35 to 0.50 to the dollar, but the company can be an effective $3bn revenue company after it emerges from a Chapter 11. The only really hope to salvage the current stock is if revenue/profit grow enough to effectively put a dent in the debt in the next 5 years. If debt is reduced by $5bn without asset sales, that would be the right direction. If the next earnings release show continue erosion of sales and increased costs, then the possibility of Chapter 11 looms. Chapter 7 is highly unlikely, unless everybody stops buying the products at the same time. That's when the company will need to close the doors for good.

 

Chapter 11 Bankruptcy does to shareholders and bond holders basically the same thing as an account in Bernie Madoff's investment firm. Fucks them all over. These are people that won't take kindly to that.

 

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