Valeant Pharmaceuticals lost 47 percent of its value on Tuesday after investors learned of a possible default. The Canadian company slashed its guidance and warned Tuesday that it will violate an agreement with creditors if it fails to file a key annual report by April 29.
The violation would allow Valeant’s lenders to declare a default and demand their money back before they originally planned, according to CNN Money. Valeant noted in its statement that it is “working diligently” to complete the report on time, but that it has asked to get the deadline pushed back.
Bill Ackerman, a well-known hedge-fund manager and major Valeant shareholder, stated of the news, “Uncertainty about the potential for a default creates enormous investor fear.”
An article by Business Insider on Tuesday claimed that “Wall Street just turned its back” on the pharmaceuticals company and CEO Mike Pearson. The potential default is one of many issues Valeant has faced in recent years. The company has become the focal point of anger because of dramatic drug price increases that have taken place at some firms.
Things got worse in October when a research firm accused the drug company of Enron-like fraud. The firm, Citron Research, bets against Valeant’s stock. It specifically pointed out the company’s relationship with Philidor, its mail-order pharmacy.
Valeant admitted that the transition from using Philidor to Walgreen was rocky. In a conference call with analysts, Pearson noted, “Our business is not operating on all cylinders, but we and I are committed to getting it back on track.”
Valeant’s stock saw an all-time high in August at $264, but as of Tuesday, the stock had plummeted to $35. Ackman noted that the recent issues with the company have caused investors to “lose total confidence in the company.”
Valeant Pharmaceuticals’ stock collapse is no surprise, given the lack of confidence it has given investors in recent months.