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Valeant CEO forced to sell shares to repay $100M loan

By
Post Staff Report
Published Nov. 6, 2015, 10:30 a.m. ET

Valeant’s plunging stock has put the squeeze on CEO Michael Pearson.

Pearson was forced to sell 1.3 million Valeant shares Thursday to repay a $100 million personal loan he had secured from Goldman Sachs using his stock as collateral.

The margin call was triggered by the steep drop in Valeant’s shares, which are down more than 60 percent since September as questions swirl around the company’s drug pricing and business practices.

“Goldman Sachs required repayment of the loans, and has informed the company that it sold the shares it held as collateral in satisfaction of the loans,” the company said in a statement on Friday.

Pearson said in the statement that he has not sold any shares “provided to me as compensation, and it was not my desire that shares be sold now.”

Valeant disclosed in April that it had allowed Pearson to borrow against his company holdings. He handed over 2 million shares — or roughly 20 percent of his stock holdings — to Goldman as collateral for the $100 million loan.

Pearson used the money to make charitable donations to his alma mater, Duke University, and fund a community swimming pool, according to the statement. He also used the money to buy more Valeant stock and to meet tax obligations.

Pearson doesn’t receive a base salary and instead is compensated through cash and stock incentives.

While Pearson at one point was a billionaire on paper, he followed the path of corporate titans who prefer to borrow against their portfolios rather than sell their holdings.

The execs typically use shares as collateral to secure personal loans or lines of credit, exposing them to possibility that they may have to sell if there is a plunge in the share price.

Valeant is under scrutiny over how it prices and distributes drugs, in particular its relationship with a specialty pharmacy Philidor. Lawmakers and regulators are also demanding more details from the company.

The shares were little changed at $78.69 Friday morning after the company announced the share sale.