Warren Buffett’s investment firm Berkshire Hathaway is surely regretting its big investment in Israel’s Teva Pharmaceuticals. That company is now facing multiple civil suits and other legal headaches. The investment could end up being as bad for Buffett as attempting to short Herbalife was for Bill Ackman.
Teva once had a market cap of $39.47 billion. Today it is roughly $10.5 billion. This has to do with the company’s involvement in the whole painkiller pushing/opioid epidemic scandal in America, government investigations into high pricing and other things.
Berkshire has been a large investor in Teva since 2018. In 2018, its stake in Teva went up to a reported $358 million. It eventually hit $750 million.
Globes reports that at the end of the third quarter of 2021, Berkshire Hathaway’s shares in Teva were worth $417 million. But the same number of shares, today, are worth just $404 million.So the firm may have lost as much as $350 million on its Teva investment.
In September, a court decided that Teva Pharmaceuticals must face charges filed against it over the illegal transfer of ill-gotten royalties to charitable organizations. Massachusetts District Court Judge Nathaniel Gorton overruled Teva’s motion to have the case dismissed, rejecting the company’s claim that since it did not control how the donations were dispersed then it was not in violation of U.S. Federal laws.
Back in May, the Motley Fool warned Warren Buffett about Teva and told him that he should divest from his interests in that company. The website cited the many legal problems that Teva faces, including all of the civil suits related to its part in the opioid epidemic in America.
On the bright side for Warren Buffett, some people are seeing light at the end of the tunnel for Teva. The company has made some positive changes in recent years. It has also laid off many employees and cut costs.
If Teva wins the lawsuits then Buffett will win back much of his money. But if it does not, then Buffett will lose the rest.