The holders of the Sequoia Fund are adding insult to injury. The large Valeant Pharmaceuticals position held by the fund can’t be liquidated in an orderly manner so the fund holders who would like to exit are receiving shares of other holdings instead of cash.
Valeant Pharmaceuticals has gone from darling to pariah in less than a year. They’ve finally jettisoned the CEO, but are now facing off with bondholders over a technical default for not filing timely financials.
Investors can learn a great deal from the lesson. Financial engineering, serial acquisitions, and an aggressive management leads to disaster. Throw in a healthy dose of debt to pay for the growth and you have a powder keg ready to explode at the first sign of downturn.