Post-disastrous Valeant investment, soul-searching Ackman reflects on lessons learned

Valeant
Bill Ackman's Pershing Square Capital Management's Valeant holding sank by 19.2% in 2016.

One-time Valeant enthusiast and hedge fund manager Bill Ackman has already lamented his huge bet on the now-imploded drugmaker as “one very big mistake.” But now, he’s going a step further, apologizing to investors for that mistake—and reflecting on the lessons he’s learned along the way.

As part of Pershing Square Capital Management’s 2016 annual report, Ackman penned a letter to clients admitting the “huge mistake” that was his Valeant investment and assuming “100% of the responsibility” for the losses they sustained as Valeant’s shares plunged over the last 20 months.

RELATED: Ackman laments his Valeant bet as 'one very big mistake'

“While I and the rest of the Pershing Square team have suffered significant losses from this failed investment as we are collectively the largest investors in the funds, it is much more painful to lose our shareholders’ money, and for this I deeply and profoundly apologize,” he wrote of the 19.2% hit Pershing’s Valeant stake took for the year.

But the episode was not without its learning opportunities, he stressed. Some of Pershing’s key takeaways from the experience: You can’t assign material value to a management team’s dealmaking history; regulations, politics, and other uncontrollable factors can take a pretty big bite out of a company’s intrinsic value; and even a management team with a strong track record can slip up—big time—every once in a while.

RELATED: Billions in the hole, battered hedge funder Ackman finally ditches his long, painful Valeant investment

Ackman’s look back comes just a couple of weeks after Pershing Square’s decision to bail on its longtime investment in the embattled Canadian drugmaker. Over the course of his Valeant involvement, as things went from good to bad to worse, he served as the company’s hostile M&A pursuit partner, cheerleader, activist investor and, eventually, board member.

And while he applauded the new management team’s recent efforts to get back on track, he also defended his decision to finally part ways with the foundering company. “While Valeant has made significant progress and we expect management to continue to do so, there is still a lot of work to be done,” he noted.

Meanwhile, Valeant—under multiple investigations and facing debt-default worries, poor product sales and federal charges against a former employee, to name a few of its hurdles—hasn’t been able to right the ship since new skipper Joseph Papa took over last spring. That didn’t stop the company from awarding him a $62.7 million pay package, though, missed financial targets aside.