What: Valeant Pharmaceuticals (NYSE:VRX) was up about 15% today after climbing 3.2% yesterday. The only news seems to be a report from Reuters that the company will offer cash and stock to incentivize employees to stick around. The company may also be getting a boost from Citi Credit Research initiating coverage with an overweight.
So what: The drug company has had a tumultuous month or so -- outlined here -- so it's not too surprising that employees might consider leaving. Losing employees isn't the end of the world, but it's likely cheaper to offer incentives to stay than to lose their corporate memory and have to train new employees.
Reuters reports that "about 70 Valeant employees in key positions below the executive level are receiving cash and stock to stay with the company" and that more U.S. staff are likely to get incentives in the coming weeks. Outside the U.S., the fear of a mass exodus isn't as much of a worry because Valeant goes by other names.
Now what: Retaining employees is clearly a prudent move for Valeant to make, helping ensure the long-term health of the company. Whether it's worthy of a double-digit gain is debatable, but given all that's happened with Valeant, it was almost inevitable that the valuation would overshoot on the low side before rebounding.
As you can see on the chart, there have been a few rebounds before, so we won't know for a little while whether Tuesday was the low, but it's clear investors have a long way to go before reaching recent highs.
Brian Orelli has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Valeant Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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