Speaker 1: Global business news twenty four hours a day. If Bloomberg
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Speaker 1: this is a Bloomberg Business Flash and I'm Karen Moscow.
Speaker 1: Valion Pharmaceuticals International is at one point seven percent right now.
Speaker 1: It's chief executive, Mike Pearson will step down following a
Speaker 1: series of missteps and criticism at the drug maker that
Speaker 1: culminated in a drop in the company shares last week.
Speaker 1: Stocks meanwhile little change. They are near the highest levels
Speaker 1: this year amid deal activity, while investors assess a rally
Speaker 1: that turned equity is positive for the year. We check
Speaker 1: the markets every fifteen minutes throughout the trading day on
Speaker 1: Bloomberg the S and P five hundred again it'll change
Speaker 1: at nine. The Dow Jones Industrial Average down to point
Speaker 1: to seventeen thousand, six hundred, and the NASDAC is up
Speaker 1: to ten per center nine points to forty eight oh
Speaker 1: five ten. Your treasury is down thirteen thirty seconds. The
Speaker 1: yield one point nine two percent yield on the two
Speaker 1: year point eight five percent. Nimex screwd oil of one
Speaker 1: point two per center forty six cents to thirty nine
Speaker 1: ninety A barrel called my school down seven tenths per
Speaker 1: cent or eight dollars fifty cents at twelve ounce, the
Speaker 1: euro at dollar twelve sixty seven, and the yen is
Speaker 1: at one eleven point eight two. And that's a Bloomberg
Speaker 1: business flash, Tom and Mike Karen, thanks so much Bloomberg
Speaker 1: Surveillance this morning bunch of by Interactive Brokers. They offered
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Speaker 1: the valiant in a minute. Here we've got a good
Speaker 1: guest on that, uh coming up. But right now, three
Speaker 1: quick questions. John Butler joining us from Bloomberg Intelligence. As
Speaker 1: we look at Apple, I am dismayed, John Butler at
Speaker 1: the idea of unit focus in product focused by the
Speaker 1: media and even to an extent, the street. To meet
Speaker 1: Apple's all always been about profitability. This new phone they're
Speaker 1: coming out with, isn't it all like older stuff where
Speaker 1: it's immediately profitable to the company. It is, Tom, I
Speaker 1: mean that's a great point. Today's UH introduction of the
Speaker 1: iPhone se UH is really Apple's first attempt, in my view,
Speaker 1: at a product line extension of the iPhone. So they're
Speaker 1: taking the latest specs from the iPhone Sex and the
Speaker 1: Success Plus and they are pouring into the older chassis
Speaker 1: the iPhone five. And so what the appeal of that is.
Speaker 1: I think a lot of people and estimated six of
Speaker 1: the installed base are hanging onto phones that are don't
Speaker 1: want to spend money or older. I think they want
Speaker 1: a smaller form factor and I think a smaller form
Speaker 1: factor a five S with updated specs is going to
Speaker 1: be a winner. That's my sense. This is the first
Speaker 1: time they've done sort of filling in of hole in
Speaker 1: their product line as opposed to launching something completely new. Yeah,
Speaker 1: but think about it, Mike. In the past, what Apple
Speaker 1: would always do what lower price points is they would
Speaker 1: they would sell the old ones. So people didn't have
Speaker 1: an opportunity to have a smaller form factor phone, and
Speaker 1: believe me, there's demand out there for that. They didn't
Speaker 1: have a chance to buy that phone with updated specs.
Speaker 1: And so even though we're not getting a brand new camera,
Speaker 1: in terms of new technology or a brand new series
Speaker 1: or operating system. It's gonna be on part of the
Speaker 1: latest technology on the more, a Samsung killer in seven
Speaker 1: eighths of the world that can't afford six eight, nine
Speaker 1: hundred dollars for the new whizbang product. Michael mckeees buying
Speaker 1: for his family over in Fifth Avenue the West Side.
Speaker 1: I'll make no comment on that, but is it a
Speaker 1: Samsung killer? Well, you know what brings them into a
Speaker 1: part of the market really where they've never been in before,
Speaker 1: which is that mid I don't know the price yet,
Speaker 1: but I imagine it's going to be a mid priced phone.
Speaker 1: Samsung plays at the high end, the mid range, and
Speaker 1: the low end, and so this will expand Apple's reach
Speaker 1: from the premium only segment, hopefully down more into the
Speaker 1: mid range with an updated device. Okay, John, we gotta
Speaker 1: leave it there. The new slowest morning is extraordinary. Thank
Speaker 1: you for the two brief of his It will get
Speaker 1: you back when McKee has to buy his six plus
Speaker 1: right now. Um, there's any number of people working on
Speaker 1: Valiant this morning. For Zach Tracer is with Bloomberg News
Speaker 1: and he joins us, uh, now, we're only having a
Speaker 1: mom because Duke is doing pretty well in the brackets
Speaker 1: and uh, we figure zach is looking forward to the
Speaker 1: Duke Oregon. Zachary, good morning. What is the distinctive feature
Speaker 1: that you, Cynthia Coons and others are looking for right now?
Speaker 1: What's the information you need from Valiant? You know, we're
Speaker 1: just trying to understand, you know, what is really going
Speaker 1: on here. We saw, you know, Valiants say, you know,
Speaker 1: the chief financial officer, um, you know, basically being asked
Speaker 1: the former chief financial officer being asked to resign. Um,
Speaker 1: the CEO leaving as well as soon as the successor
Speaker 1: is named. Um, you know, material weaknesses in internal controls.
Speaker 1: There's a lot of trouble for Valiant this morning and
Speaker 1: trying to understand, Um, you know what it means for investors.
Speaker 1: Do we know when we might find out more? You know,
Speaker 1: we're obviously working on it over here. UM. You know
Speaker 1: the company has said, you know, they've asked for additional
Speaker 1: time to file their you know, their annual report. UM,
Speaker 1: so it could be you know, a few more weeks
Speaker 1: at least, Zack, thank you so much, and until thank
Speaker 1: you to Cynthia Coon's for helping us out earlier. Mike
Speaker 1: bringing our next guest. Gerald has as a portfolio manager
Speaker 1: a light Water Partners, and they took a short position
Speaker 1: on Valiant when it was the third largest company in
Speaker 1: the Toronto Stock Exchange back in July at two thousand fifteen,
Speaker 1: saying they saw a number of red flags. Mr Hu
Speaker 1: joins us. Now, Um, what did you let me put
Speaker 1: it this way? What we're seeing now from Valiant is
Speaker 1: that what you saw in two thousand fifteen. Well, the
Speaker 1: first thing that we saw was we were very concerned
Speaker 1: about their debt levels. So when they completed the Salex
Speaker 1: acquisition in the spring and early summer, their debt to
Speaker 1: EVE at DA ratio was at six times. So on
Speaker 1: the numbers that we look at the last quarter that
Speaker 1: came out, that numbers actually risen to about six point
Speaker 1: eight times. So they haven't addressed that. That issue something
Speaker 1: that they're clearly going to have to address going forward.
Speaker 1: But the other is that we just generally hate serial acquirers,
Speaker 1: and Valiant was the poster boy for serial acquirers, and
Speaker 1: so um our view is, let's uh, let's see what
Speaker 1: they've actually got. Um without the young acquisitions, their goodwill,
Speaker 1: bad will, their other intangible assets is a large number.
Speaker 1: How do you translate the quality of a big hunk
Speaker 1: of their balance sheet at this moment. Well, that's a
Speaker 1: very difficult proposition. And agree why we don't like serial
Speaker 1: acquires because you can hide so much with the accounting.
Speaker 1: You really have to take a lot on face value
Speaker 1: initially from the management, but eventually it takes a couple
Speaker 1: of quarters for that to come out. You can actually
Speaker 1: get a look under the hood and see what they've
Speaker 1: really got there. Yeah, Mike, the goodwill and within intagibles
Speaker 1: in this case, let's call it collegiately, bad Will has
Speaker 1: gone from one point three billion to a published twenty
Speaker 1: one billion. Let me if that's I believe. I've never
Speaker 1: seen this one point for billion to twenty point six
Speaker 1: billion dollars in five years. What will you? Can you
Speaker 1: stay short this security at this time? Well, we've actually
Speaker 1: gone to the sidelines. I mean, when the stock drops
Speaker 1: UM in a day, you're a short seller. It's time
Speaker 1: to move to which champagne did you buy? Well, it's
Speaker 1: it's one of one of our shortholdings. So it's not
Speaker 1: a huge position for us. But UM at this point,
Speaker 1: or at that point, it wasn't but that's a that's
Speaker 1: the downside of one of the short works very well
Speaker 1: for you. It becomes less and less as a percentage
Speaker 1: of your portfolio. But you know, it's nice to see
Speaker 1: things coming through when you're when you're a hedge fund,
Speaker 1: you know, when you're shorting of stock, you have to
Speaker 1: get two things right. One is the thesis right, the
Speaker 1: other is a timing right. And we were fortunate that
Speaker 1: eventually it came through. In terms of Valiant, this is
Speaker 1: a stock that has been up and down based on
Speaker 1: newsflow ever since the first reports of trouble there. It's
Speaker 1: up right now? Is that an error by investors? Can
Speaker 1: this stock reclaim it's uh its value? Well, I'm not
Speaker 1: really going to comment on that because, um, well, I
Speaker 1: don't think it hits three fifty anytime soon in terms
Speaker 1: of Canadian dollars. Um. But I think this stock became
Speaker 1: an overcrowded trade on the short side after it hit
Speaker 1: the way down, and so for us, we don't like
Speaker 1: to participate in crowded trades, or at least be on
Speaker 1: the same side of them, and so for us we
Speaker 1: do it as a time to be on the sidelines.
Speaker 1: And I think a lot of investors. We we'd actually
Speaker 1: asked ourselves after five heavy days of selling, at some
Speaker 1: point this has become a buy. And there's probably other
Speaker 1: short sellers that they're thinking the same thing, Jero, Jerome,
Speaker 1: you've got a shingle from the London School of Economics.
Speaker 1: But far more important than that, you darken the door
Speaker 1: of one of the best economics programs in the world,
Speaker 1: the University of Western Ontario. Folks, I can't say enough
Speaker 1: about their statistics work as well. You've got the cred.
Speaker 1: If you had a cup of coffee now with board
Speaker 1: member William Ackman, what would you advise him? Uh? You
Speaker 1: know what, I we don't really get into micromanagement at
Speaker 1: this level. But I don't know. We have a lot
Speaker 1: of respects for the Lackman. He's a very smart guy.
Speaker 1: It's got a very great track record. UM. If I
Speaker 1: was a valiant shareholder, UM, I would view it as
Speaker 1: a very positive step that he's becoming actively involved in it. So,
Speaker 1: but we don't. We don't even get involved with the
Speaker 1: micro management of our company. Well, congratulations on your belief
Speaker 1: of many quarters ago, and we hope we can speak
Speaker 1: to you again. Jerome hass Uh is with the good guys.
Speaker 1: Lightwater Partners is well. Michael mckeey was like, way out front.
Speaker 1: Is that accurate? Yes? Uh, you know, the folks at
Speaker 1: Citron Research Andrew Left was the first to publish the
Speaker 1: Valiant concerns, and of course they called him all kinds
Speaker 1: of names. Yeah, that's that's part. He turned out to
Speaker 1: be right. And the folks at Lightwater also got in
Speaker 1: early on the short haven't they been retained to help
Speaker 1: the Toronto the police. Somebody's well, no, we're not even
Speaker 1: going there. Jerome hasas wonderful to speak to him on
Speaker 1: this day. There'll be much more on Bloomberg Radio to
Speaker 1: brief you on bow Wall Street about Valiant. A lot
Speaker 1: of other news is well. Green on the screen up
Speaker 1: seven Uh the vics fourteen point three zero. This is
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