A new lawsuit accuses hedge fund manager Bill Ackman and Canadian firm Valeant Pharmaceuticals International Inc. of insider trading in Allergan Inc. stock before their unsuccessful bid to acquire the Botox maker.
The lawsuit was filed Wednesday on behalf of investors who sold shares of Allergan between February and April, the period that Ackman's Pershing Square Capital Management quietly bought nearly 10% of Allergan's stock.
On April 22, Valeant and Pershing Square made a formal offer to buy Allergan. The company's stock soared in the months to follow, adding billions of dollars to the value of Ackman's investment.
Last month, Allergan agreed to be acquired by Irish firm Actavis for $66 billion, and Valeant withdrew its bid for the company. Pershing Square stands to make more than $2 billion in profit on its investment.
The lawsuit, filed in U.S. District Court in Santa Ana, alleges that Ackman purchased the shares while holding "material, non-public information" that the sellers of the stock did not have.
"The Pershing defendants profited handsomely – and illegally – from their massive purchases of Allergan stock," the lawsuit alleged.
Valeant and Pershing Square declined comment.
The companies have previously defended Pershing Square's stock purchases, saying they were legal because Pershing Square was a partner of Valeant in the attempted purchase of Allergan.
The lawsuit lists one named plaintiff, Anthony Basile, who said he sold 2,000 shares of Allergan stock on Feb. 25 for $125.54 a share, the day that Ackman began accumulating shares in the Botox maker.
When Pershing Square and Valeant announced an offer to buy Allergan on April 22, the company's stock soared to $163.65.
The lawsuit seeks certification as a class action. Plaintiff lawyer Francis A. Bottini Jr. said he thought damages could exceed $2 billion.