Wall Street was aghast this week at the apparent suicide of Sanjay Valvani, a senior executive in Visium, a US hedge fund, after he was accused of insider trading. Valvani's case seemed clearer than other cases of insider trading, because he reportedly received concrete payment for the information he divulged.
Valvani formerly worked for the US Food and Drug Administration (FDA), and the information he provided was usually advance notice he obtained from an FDA friend of approval or delay of approval for new drugs. The friend confessed what he had done, which apparently took place from 2005 until 2011.
Valvani may not have been the only senior officeholder in the fund to commit illegal acts, and insider information may not have been the only form of fraud practiced by the fund. Valvani's partners were also accused of fabricating the value of the fund's holdings in its books in order to show investors a higher return than they actually achieved. Valvani and his partners allegedly made $32 million from these acts, but we will probably never know the details, because the investigation against Valvani ended with his death.
The fund liquidated its holdings
The consequences of this story are having an effect on the fund itself and its holdings. Visium manages $7.8 billion, and has many holdings in the biomed and health industry. Following the many accusations against the fund and Valvani's tragic act, it was decided to liquidate the fund's entire holdings.
Among other things, this includes several holdings in pharma and biomed companies listed on the Tel Aviv Stock Exchange (TASE). For example, as of March 31, 2016, Visium held Perrigo Company (NYSE:PRGO; TASE:PRGO) shares worth $33 million, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) shares worth $18 million, Enzymotec Ltd. (Nasdaq: ENZY) shares worth $18.8 million, and RedHill Biopharma Ltd. (Nasdaq: RDHL); TASE: RDHL) shares worth $6.1 million. The fund, which is not required to report its holdings, may own shares in other TASE-listed companies.
The companies are now looking for buyers with good reputations to buy Visium's holdings in their shares. The HotStocks investors website today reported that one of the companies has already found such a buyer - Mori Arkin, who paid $6.1 million for Visium's Redhill stake. Enzymotec, whose Visium-held shares account for a substantial proportion of its market cap, has apparently also found a buyer.
Redhill, a multidisciplinary drug development company, has a NIS 538 million market cap. Its leading products, new formulations of existing drugs for treating migraine headaches and nausea in cancer patients, are already on the market. It also has drugs for the treatment of H. pylori infections and Crohn's disease in the later stages of clinical trials.
Published by Globes [online], Israel business news - www.globes-online.com - on July 10, 2016
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