BHC

Bausch Health ($BHC): The Conviction Behind Wall Street Legend John Paulson's $300M Buying Spree

08/15/2025 01:42

Legendary Wall Street investor John Paulson is demonstrating unwavering confidence in Bausch Health Companies ($BHC) through massive consecutive purchases. The founder of Paulson & Co, famous for earning $15 billion from shorting subprime mortgages during the 2008 financial crisis, purchased a staggering $324.6 million worth of $BHC shares over three consecutive days in mid-August, according to SEC filings. Bausch Health is a Canadian-headquartered specialty pharmaceutical and medical device company operating through divisions including Salix (gastrointestinal drugs), Bausch + Lomb (ophthalmic treatments and devices), and Solta Medical (aesthetic medical devices). Formerly known as Valeant Pharmaceuticals, the company rebranded in 2018 and currently employs approximately 20,700 people. Paulson's purchases represent more than simple investment moves—they signal strategic positioning. On August 11, he bought 2 million shares ($127 million), followed by approximately 1.15 million shares ($80 million) on August 12, 86,000 shares ($6 million) on August 13, and culminated with a massive purchase of 34.7 million shares at $9.00 per share on August 14, totaling $312.5 million. While held through investment funds he manages, SEC filings recognize his substantial beneficial ownership influence. Notably, this August buying spree follows his June purchases, when he acquired approximately $358 million worth over four days. Combined, Paulson has invested over $680 million in $BHC within just two months. The timing of Paulson's purchases relative to share price movements deserves investor attention. $BHC shares plummeted from around $7.60 in July 2024 to lows near $4.00 in April-May 2025, before beginning recovery in June. Paulson's June buying occurred when shares traded in the $5-6 range, while his August purchases came as shares recovered to the $6-7 level. This suggests he's not merely bottom-fishing but betting on fundamental value recovery. However, $BHC faces significant challenges. The company carries an extremely high debt-to-equity ratio of approximately 14,788%, raising serious financial stability concerns. Q2 2025 results showed revenue growth of 5.3% to $2.53 billion, but earnings per share of $0.91 missed analyst estimates of $0.97. The Diversified Products segment declined 12.8%, highlighting ongoing weakness in certain core businesses. Nevertheless, growth engines remain alive with Salix growing 12.4% and Solta Medical surging 25.5%. Paulson's investment gains significance from his investment philosophy and track record. His 2008 financial crisis prediction and subsequent historic profits established him as a contrarian value investor who conducts deep fundamental analysis. His typical pattern involves making large investments in fundamentally sound companies during market-shunned periods. His past investment in AngloGold Ashanti, where he increased stakes during difficult periods, exemplifies his long-term investment approach. Market speculation continues around potential sale of subsidiary Bausch + Lomb. December 2024 reports suggested private equity firms TPG and Blackstone were considering a joint acquisition worth up to $11.5 billion. A successful sale could significantly reduce $BHC's debt burden. Paulson's continued stake building appears positioned to capture shareholder value creation opportunities during potential restructuring. Positive indicators for investors include robust cash flow generation. Q2 2025 operating cash flow reached $1.51 billion annually, with cash holdings of $1.73 billion providing adequate short-term liquidity protection. Double-digit growth rates in Salix gastrointestinal drugs and Solta Medical aesthetic devices demonstrate enduring competitive advantages. Warning signs include the extremely high debt ratio alongside persistent revenue declines in certain segments. Neurology and Orthopedic Dermatology products declined 7.8% and 25.7% respectively, representing concerning trends. High share price volatility also presents ongoing risk. Optimistic scenarios see Paulson's investment catalyzing broader institutional interest. Successful Bausch + Lomb divestiture could trigger debt reduction and improved profitability in remaining businesses. The most likely base case involves gradual restructuring improving debt ratios while maintaining core business growth momentum. Risk scenarios include persistent debt burdens leading to increased interest costs and further profitability deterioration. Overall, Paulson's massive investment sends a powerful signal that $BHC trades below intrinsic value at current prices. However, investors must carefully weigh the company's high debt burden and certain business segment weaknesses against this legendary investor's confidence. While his conviction is undeniably positive, realizing investment returns may require considerable time and patience.