BHC

Bausch Health ($BHC) Draws Attention with Paulson's Historic $300M Bet and Extreme 0.23x Sales Undervaluation

11/28/2025 22:42

Legendary Wall Street investor John Paulson's massive bet on Bausch Health Companies ($BHC) has become a focal point among investors, particularly his single-day purchase of $312.49 million on August 14, marking one of his largest individual stock investments to date. Bausch Health is a global healthcare company developing and manufacturing pharmaceuticals and medical devices across specialized therapeutic areas including ophthalmology, gastroenterology, dermatology, and neurology. As the successor to Allergan, known for Botox, the company now primarily operates through its subsidiary Bausch + Lomb, focusing on contact lenses and ophthalmic medical devices. However, the company has been undergoing restructuring for several years due to a massive debt burden of $21 billion, with subsidiary divestiture for debt reduction remaining a key challenge. Paulson's investment timing appears highly strategic. He invested over $360 million from June through August, precisely coinciding with the stock's recovery from its April low of $4.32. His four consecutive days of purchases from August 11-14, totaling $330 million, strongly suggests his conviction in the company's fundamental value. Paulson, who became one of the protagonists of "The Big Short" by earning $15 billion from the subprime mortgage crisis, has demonstrated exceptional ability in distressed situation investing. His Paulson & Co. currently holds approximately 19% of Bausch Health as the largest shareholder and participates on the board, indicating strategic involvement beyond mere financial investment. From a financial perspective, Bausch Health's attractiveness is substantial. Despite generating $10 billion in annual revenue and $3.3 billion in EBITDA with solid cash generation capabilities, the market cap stands at only $2.3 billion, resulting in extremely low valuations of 0.23x sales and 6.7x EBITDA. The forward P/E ratio of 1.48x is about one-tenth of the industry average. The key metric investors should focus on is the company's cash flow. Operating cash flow of $1.5 billion provides sufficient capacity for debt servicing and business operations. Additionally, the high operating margin of 26.74% demonstrates strong profitability in medical devices and specialty pharmaceuticals. However, the negative debt-to-equity ratio remains a risk factor requiring careful observation. The ongoing Bausch + Lomb divestiture discussions also present a positive variable. Reports indicate that private equity firms TPG and Blackstone are considering a joint $11.5 billion acquisition, which, if realized, would significantly help resolve debt issues. Paulson's massive investment at this juncture appears to be a strategy to preemptively capture value that will be created through this restructuring process. Looking ahead, in an optimistic scenario, successful completion of the Bausch + Lomb sale and significant debt reduction could drive the stock to 2-3 times current levels. The most likely base scenario involves gradual debt reduction with steady value recovery based on stable cash flows. Risk scenarios include potential deal collapse or unexpected variables in the debt restructuring process causing stock declines. For specific criteria investors should monitor, official announcements regarding Bausch + Lomb divestiture or Paulson's additional stake increases could be interpreted as strong bullish signals. Conversely, quarterly operating cash flow falling below $300 million or difficulties in debt maturity extensions would require reassessment of the investment thesis. Overall, Paulson's massive investment serves as a powerful signal regarding Bausch Health's intrinsic value that the market may be overlooking. While high debt presents risks, considering the solid business foundation and attractive valuation, the risk-adjusted return potential appears quite compelling as an investment opportunity.