Valeant Pharmaceuticals International Inc. shares tumbled 25% Wednesday, after a short seller alleged revenue-recognition improprieties, adding to the recent pressure on the stock. Short-selling firm Citron Research published a damning report on Wednesday, alleging that there is a secret relationship between Valeant and a subsidiary called Philador and a customer of Philador's called R&O. Valeant had never disclosed the existence of Philador until recent scrutiny of the company's accounting and distribution forced it to do so on its last earnings call. Citron claims that Philador and the downstream customer are one and the same, meaning Valeant is shipping product to its own subsidiary and then falsely claiming the revenue. The issue is complicated by the complex ownership structure of all the companies. Valeant was not immediately available to comment. Citron, run by investor Andrew Left, is well-known in investing circles. This summer, its report on chip maker Ambarella Inc. sent that company's shares tumbling; in late 2014, it drew the attention of Hong Kong regulators following a report about a Chinese property developer. Citron has published two other reports on Valeant this fall. Hedge fund Pershing Square Capital Management Inc., the company's third-biggest shareholder and a staunch supporter of Valeant, declined to comment.
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