Valeant Pharmaceuticals accidentally awarded its CEO around $US28 million worth of stock, and in correcting the error Mike Pearson actually made a bundle, according to the Southern Investigative Reporting Foundation.
These kinds of dealings have become important as controversy surrounds the company. In January, Pearson agreed to accept compensation entirely in stock.
Now, the stock’s value has been crushed and at least one of Pearson’s creditors — Goldman Sachs — has forced him to sell some shares that it held as collateral against a $US100 million loan.
In multiple conference calls to its investors, Valeant has stressed its commitment to transparency in the midst of this mess. This stock sale “accident,” which was disclosed as a footnote in a government filing, challenges that notion.
The error was simple, Pearson was delivered shares before a pre-determined vesting price target.
The filing said (emphasis ours):
On May 24, 2013, the Registrant delivered 502,996 vested performance share units (the “2010 PSU Grant”) to Mr. Pearson in error. In connection with Mr. Pearson returning to the Registrant the value of such shares on the date of delivery (plus interest), Mr. Pearson has been credited with 502,996 vested share units to be delivered to him in accordance with the terms of the original 2010 PSU Grant.
The error was made in May 2013 when Valeant was worth $US84.47, but because Pearson didn’t rectify the mistake until March of 2014, when Valeant’s stock was worth $US139.96, he seems to have made a nice profit on the trade.
Here’s how Pearson made up for it, according to SIRF:
The footnote’s language suggests that “the date of delivery” is May 24, 2013, meaning that sometime before March 13, 2014–the date of the Form 4’s filing with the SEC–Pearson wrote a check for about $US42.48 million (plus an unspecified interest rate) to own a block of Valeant shares that was then worth over $US70.39 million, a nearly $US28 million differential.
If true, not a bad deal. A little confusing though.
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