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Speaker 1: Global business news twenty four hours a day. If Bloomberg

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Speaker 1: dot Com, the radio plus mobile last and on your radio,

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Speaker 1: this is a Bloomberg Business Flash and I'm Karen Moscow.

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Speaker 1: Valion Pharmaceuticals International is at one point seven percent right now.

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Speaker 1: It's chief executive, Mike Pearson will step down following a

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Speaker 1: series of missteps and criticism at the drug maker that

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Speaker 1: culminated in a drop in the company shares last week.

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Speaker 1: Stocks meanwhile little change. They are near the highest levels

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Speaker 1: this year amid deal activity, while investors assess a rally

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Speaker 1: that turned equity is positive for the year. We check

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Speaker 1: the markets every fifteen minutes throughout the trading day on

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Speaker 1: Bloomberg the S and P five hundred again it'll change

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Speaker 1: at nine. The Dow Jones Industrial Average down to point

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Speaker 1: to seventeen thousand, six hundred, and the NASDAC is up

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Speaker 1: to ten per center nine points to forty eight oh

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Speaker 1: five ten. Your treasury is down thirteen thirty seconds. The

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Speaker 1: yield one point nine two percent yield on the two

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Speaker 1: year point eight five percent. Nimex screwd oil of one

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Speaker 1: point two per center forty six cents to thirty nine

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Speaker 1: ninety A barrel called my school down seven tenths per

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Speaker 1: cent or eight dollars fifty cents at twelve ounce, the

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Speaker 1: euro at dollar twelve sixty seven, and the yen is

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Speaker 1: at one eleven point eight two. And that's a Bloomberg

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Speaker 1: business flash, Tom and Mike Karen, thanks so much Bloomberg

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Speaker 1: Surveillance this morning bunch of by Interactive Brokers. They offered

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Speaker 1: direct market access to stocks, two options to futures for

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Speaker 1: X bonds and ets, and over one of the market

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Speaker 1: centers in twenty four countries from a single account. Visit

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Speaker 1: I v k R dot com slash trade worldwide, I

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Speaker 1: b k R dot com slash Trade Worldwide. We'll get

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Speaker 1: the valiant in a minute. Here we've got a good

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Speaker 1: guest on that, uh coming up. But right now, three

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Speaker 1: quick questions. John Butler joining us from Bloomberg Intelligence. As

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Speaker 1: we look at Apple, I am dismayed, John Butler at

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Speaker 1: the idea of unit focus in product focused by the

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Speaker 1: media and even to an extent, the street. To meet

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Speaker 1: Apple's all always been about profitability. This new phone they're

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Speaker 1: coming out with, isn't it all like older stuff where

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Speaker 1: it's immediately profitable to the company. It is, Tom, I

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Speaker 1: mean that's a great point. Today's UH introduction of the

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Speaker 1: iPhone se UH is really Apple's first attempt, in my view,

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Speaker 1: at a product line extension of the iPhone. So they're

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Speaker 1: taking the latest specs from the iPhone Sex and the

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Speaker 1: Success Plus and they are pouring into the older chassis

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Speaker 1: the iPhone five. And so what the appeal of that is.

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Speaker 1: I think a lot of people and estimated six of

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Speaker 1: the installed base are hanging onto phones that are don't

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Speaker 1: want to spend money or older. I think they want

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Speaker 1: a smaller form factor and I think a smaller form

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Speaker 1: factor a five S with updated specs is going to

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Speaker 1: be a winner. That's my sense. This is the first

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Speaker 1: time they've done sort of filling in of hole in

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Speaker 1: their product line as opposed to launching something completely new. Yeah,

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Speaker 1: but think about it, Mike. In the past, what Apple

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Speaker 1: would always do what lower price points is they would

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Speaker 1: they would sell the old ones. So people didn't have

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Speaker 1: an opportunity to have a smaller form factor phone, and

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Speaker 1: believe me, there's demand out there for that. They didn't

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Speaker 1: have a chance to buy that phone with updated specs.

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Speaker 1: And so even though we're not getting a brand new camera,

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Speaker 1: in terms of new technology or a brand new series

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Speaker 1: or operating system. It's gonna be on part of the

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Speaker 1: latest technology on the more, a Samsung killer in seven

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Speaker 1: eighths of the world that can't afford six eight, nine

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Speaker 1: hundred dollars for the new whizbang product. Michael mckeees buying

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Speaker 1: for his family over in Fifth Avenue the West Side.

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Speaker 1: I'll make no comment on that, but is it a

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Speaker 1: Samsung killer? Well, you know what brings them into a

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Speaker 1: part of the market really where they've never been in before,

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Speaker 1: which is that mid I don't know the price yet,

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Speaker 1: but I imagine it's going to be a mid priced phone.

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Speaker 1: Samsung plays at the high end, the mid range, and

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Speaker 1: the low end, and so this will expand Apple's reach

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Speaker 1: from the premium only segment, hopefully down more into the

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Speaker 1: mid range with an updated device. Okay, John, we gotta

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Speaker 1: leave it there. The new slowest morning is extraordinary. Thank

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Speaker 1: you for the two brief of his It will get

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Speaker 1: you back when McKee has to buy his six plus

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Speaker 1: right now. Um, there's any number of people working on

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Speaker 1: Valiant this morning. For Zach Tracer is with Bloomberg News

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Speaker 1: and he joins us, uh, now, we're only having a

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Speaker 1: mom because Duke is doing pretty well in the brackets

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Speaker 1: and uh, we figure zach is looking forward to the

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Speaker 1: Duke Oregon. Zachary, good morning. What is the distinctive feature

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Speaker 1: that you, Cynthia Coons and others are looking for right now?

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Speaker 1: What's the information you need from Valiant? You know, we're

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Speaker 1: just trying to understand, you know, what is really going

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Speaker 1: on here. We saw, you know, Valiants say, you know,

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Speaker 1: the chief financial officer, um, you know, basically being asked

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Speaker 1: the former chief financial officer being asked to resign. Um,

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Speaker 1: the CEO leaving as well as soon as the successor

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Speaker 1: is named. Um, you know, material weaknesses in internal controls.

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Speaker 1: There's a lot of trouble for Valiant this morning and

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Speaker 1: trying to understand, Um, you know what it means for investors.

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Speaker 1: Do we know when we might find out more? You know,

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Speaker 1: we're obviously working on it over here. UM. You know

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Speaker 1: the company has said, you know, they've asked for additional

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Speaker 1: time to file their you know, their annual report. UM,

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Speaker 1: so it could be you know, a few more weeks

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Speaker 1: at least, Zack, thank you so much, and until thank

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Speaker 1: you to Cynthia Coon's for helping us out earlier. Mike

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Speaker 1: bringing our next guest. Gerald has as a portfolio manager

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Speaker 1: a light Water Partners, and they took a short position

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Speaker 1: on Valiant when it was the third largest company in

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Speaker 1: the Toronto Stock Exchange back in July at two thousand fifteen,

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Speaker 1: saying they saw a number of red flags. Mr Hu

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Speaker 1: joins us. Now, Um, what did you let me put

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Speaker 1: it this way? What we're seeing now from Valiant is

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Speaker 1: that what you saw in two thousand fifteen. Well, the

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Speaker 1: first thing that we saw was we were very concerned

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Speaker 1: about their debt levels. So when they completed the Salex

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Speaker 1: acquisition in the spring and early summer, their debt to

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Speaker 1: EVE at DA ratio was at six times. So on

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Speaker 1: the numbers that we look at the last quarter that

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Speaker 1: came out, that numbers actually risen to about six point

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Speaker 1: eight times. So they haven't addressed that. That issue something

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Speaker 1: that they're clearly going to have to address going forward.

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Speaker 1: But the other is that we just generally hate serial acquirers,

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Speaker 1: and Valiant was the poster boy for serial acquirers, and

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Speaker 1: so um our view is, let's uh, let's see what

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Speaker 1: they've actually got. Um without the young acquisitions, their goodwill,

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Speaker 1: bad will, their other intangible assets is a large number.

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Speaker 1: How do you translate the quality of a big hunk

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Speaker 1: of their balance sheet at this moment. Well, that's a

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Speaker 1: very difficult proposition. And agree why we don't like serial

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Speaker 1: acquires because you can hide so much with the accounting.

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Speaker 1: You really have to take a lot on face value

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Speaker 1: initially from the management, but eventually it takes a couple

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Speaker 1: of quarters for that to come out. You can actually

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Speaker 1: get a look under the hood and see what they've

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Speaker 1: really got there. Yeah, Mike, the goodwill and within intagibles

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Speaker 1: in this case, let's call it collegiately, bad Will has

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Speaker 1: gone from one point three billion to a published twenty

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Speaker 1: one billion. Let me if that's I believe. I've never

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Speaker 1: seen this one point for billion to twenty point six

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Speaker 1: billion dollars in five years. What will you? Can you

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Speaker 1: stay short this security at this time? Well, we've actually

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Speaker 1: gone to the sidelines. I mean, when the stock drops

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Speaker 1: UM in a day, you're a short seller. It's time

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Speaker 1: to move to which champagne did you buy? Well, it's

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Speaker 1: it's one of one of our shortholdings. So it's not

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Speaker 1: a huge position for us. But UM at this point,

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Speaker 1: or at that point, it wasn't but that's a that's

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Speaker 1: the downside of one of the short works very well

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Speaker 1: for you. It becomes less and less as a percentage

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Speaker 1: of your portfolio. But you know, it's nice to see

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Speaker 1: things coming through when you're when you're a hedge fund,

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Speaker 1: you know, when you're shorting of stock, you have to

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Speaker 1: get two things right. One is the thesis right, the

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Speaker 1: other is a timing right. And we were fortunate that

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Speaker 1: eventually it came through. In terms of Valiant, this is

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Speaker 1: a stock that has been up and down based on

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Speaker 1: newsflow ever since the first reports of trouble there. It's

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Speaker 1: up right now? Is that an error by investors? Can

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Speaker 1: this stock reclaim it's uh its value? Well, I'm not

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Speaker 1: really going to comment on that because, um, well, I

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Speaker 1: don't think it hits three fifty anytime soon in terms

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Speaker 1: of Canadian dollars. Um. But I think this stock became

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Speaker 1: an overcrowded trade on the short side after it hit

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Speaker 1: the way down, and so for us, we don't like

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Speaker 1: to participate in crowded trades, or at least be on

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Speaker 1: the same side of them, and so for us we

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Speaker 1: do it as a time to be on the sidelines.

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Speaker 1: And I think a lot of investors. We we'd actually

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Speaker 1: asked ourselves after five heavy days of selling, at some

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Speaker 1: point this has become a buy. And there's probably other

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Speaker 1: short sellers that they're thinking the same thing, Jero, Jerome,

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Speaker 1: you've got a shingle from the London School of Economics.

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Speaker 1: But far more important than that, you darken the door

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Speaker 1: of one of the best economics programs in the world,

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Speaker 1: the University of Western Ontario. Folks, I can't say enough

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Speaker 1: about their statistics work as well. You've got the cred.

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Speaker 1: If you had a cup of coffee now with board

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Speaker 1: member William Ackman, what would you advise him? Uh? You

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Speaker 1: know what, I we don't really get into micromanagement at

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Speaker 1: this level. But I don't know. We have a lot

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Speaker 1: of respects for the Lackman. He's a very smart guy.

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Speaker 1: It's got a very great track record. UM. If I

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Speaker 1: was a valiant shareholder, UM, I would view it as

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Speaker 1: a very positive step that he's becoming actively involved in it. So,

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Speaker 1: but we don't. We don't even get involved with the

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Speaker 1: micro management of our company. Well, congratulations on your belief

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Speaker 1: of many quarters ago, and we hope we can speak

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Speaker 1: to you again. Jerome hass Uh is with the good guys.

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Speaker 1: Lightwater Partners is well. Michael mckeey was like, way out front.

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Speaker 1: Is that accurate? Yes? Uh, you know, the folks at

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Speaker 1: Citron Research Andrew Left was the first to publish the

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Speaker 1: Valiant concerns, and of course they called him all kinds

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Speaker 1: of names. Yeah, that's that's part. He turned out to

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Speaker 1: be right. And the folks at Lightwater also got in

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Speaker 1: early on the short haven't they been retained to help

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Speaker 1: the Toronto the police. Somebody's well, no, we're not even

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Speaker 1: going there. Jerome hasas wonderful to speak to him on

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Speaker 1: this day. There'll be much more on Bloomberg Radio to

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Speaker 1: brief you on bow Wall Street about Valiant. A lot

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Speaker 1: of other news is well. Green on the screen up

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Speaker 1: seven Uh the vics fourteen point three zero. This is

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Speaker 1: Bloomberg Surveillance