Valeant stock bounced today on the news that it had completed an internal review of its accounting issues with respect to revenue recognition and did not find any additional problems (Wall St Journal). Famous last words there… VRX announced that it intends to file its restated financials in its 10-K by the April 29 ‘drop dead’ date to avoid triggering a default under its bank covenants.
This Company smells more like an ‘Enron-esque’ situation every day. The revenue recognition issues connected to Philidor RX Services is just one of many issues. VRX is a literal ‘roach motel’ of bad business decisions, unethical business practices and, most likely, embedded fraud.
The stock popped up 21% in pre-market when the news report hit the tape. As you cansee from the graph to the right (click to enlarge), it’s been selling off since the initial spike. It’s likely that a few panic’d short sellers rushed to cover. However, I would bet most of the move up in the stock was triggered by a bevy of retail daytrader stock jockeys who thought it would be a good idea to chase momentum.
This post was published at Investment Research Dynamics on April 5, 2016.
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