Shares of Valeant Pharmaceuticals International plunged Tuesday following news that activist investor Bill Ackman exited the controversial drug company.
Shares of the Canadian company dived 10.9 percent to $10.80 by midday after an announcement that Ackman's hedge fund, Pershing Square Capital Management, sold its investment in the drug firm at a loss.
In addition, Ackman and fellow Pershing executive Stephen Fraidin said they would step down from the Valeant board.
The investment in Valeant accounted for just 1.5 to 3.0 percent of the value of Pershing's funds, but "required a disproportionately large amount of time and resources," the firm said in a statement.
"As a result, we elected to sell our investment and realize a large tax loss which will enable us to dedicate more time to our other portfolio companies and to new investment opportunities."
Analysts at BMO Capital Markets expressed surprise that Pershing Square opted to sell its entire stake in the company, saying the "throwing in the towel" stance "sends a poor signal regarding the road ahead for Valeant."
Pershing Square, which held about 5.3 percent of Valeant shares at the end of 2016, had stood by the drugmaker when it came under fire for hefty price increases and criticism over its accounting and business practices.
The company disclosed investigations by about a dozen government agencies in its most recent annual securities filing.
Valeant has taken steps to remake itself in response to critics, replacing its chief executive, divesting some divisions to reduce debt, and taking steps to advance a number of new drugs for regulatory approval.