If you're following Valeant's proposed takeover (or merger) of Allergan (AGN) and the lawsuit by Allergan against Valeant (VRX) and notorious hedge fund manager William Ackman, for insider trading here is a must-read article.

Linette Lopez describes the roles played by key Wall Street hedge fund owners--Jim Chanos, John Paulson, and Mason Morfit, a major shareholder in Valeant. Lopez goes through the conflicts, positions of the hedge fund managers, and legal issues.   

Are Ackman and Valeant guilty of insider trading prior to Valeant's attempted takeover of Allergan? It may come down to semantics. However, in substance, Ackman's actions clearly amount to insider trading. By the letter of the law, we may have to wait and see.

(Should the decision depend on the letter of law vs. its substance? I don't think so. This is a case where I'd apply the "duck" test: Does it walk like a duck? Quack like a duck?  Look like a duck? If the answers to those questions is yes.... it's a duck.)

The battles, for millions of dollars and control over a company, are becoming personal.  During an interview with Jim Grant, editor and founder of Grant's Interest Rate Observer, Ackman goes after Grant's daughter's employment with Chanos, which should have nothing to do with Grant's questions about Valeant. These are not new questions: "Does the company actually make money?" "Does Valeant overpay for its acquisitions?" "Doesn't it need to spend money on R&D?" 

So let's get to the article,...
 

Bill Ackman's Big Pharma Trade Is Making Wall Street A Very Awkward Place

By LINETTE LOPEZ of Business Insider

Things are getting awkward on Wall Street, and Bill Ackman is at the center of it. 

Perhaps it was only a matter of time.

The unpleasantness concerns the dogged attempts the activist investor and the pharmaceutical company Valeant have made to purchase the Botox maker Allergan.

From the beginning, the situation has been fraught with the kind of moments that make one bristle, like the time DealBook's Andrew Ross Sorkin said the controversial pile-on was "too clever by half" — due to the fact that Ackman's firm had amassed a 10% stake in Allergan, effectively limiting the company's freedom to decide its fate. 

Or there was the moment when Allergan sued Valeant and Ackman for insider trading, alleging that they colluded to make an offer for the company in February.

Or when the SEC launched its own insider trading investigation into the now-$56 billion matter.

These were all uncomfortable moments. But they weren't personal. They were part of the usual Wall Street ebb and flow of drama and information. But on Tuesday, people started veering into more discourteous territory.

It happened at the annual Grant's Interest Rate Observer conference at the Plaza Hotel, where Ackman did a short interview. The event was hosted by Jim Grant, the editor and founder of the Observer. He looks like Bill Nye but nerdier (if you can imagine), with glasses so thick you might think they could ask questions themselves.  

The interview began at 2 p.m., and Grant went straight after the elephant in the room — the Valeant-Allergan deal.

"May I call you Bill, or do you prefer 'Alpha'?" Grant asked playfully before launching into a series of questions.

Before we go any further into this story, you should know that short-seller Jim Chanos, CEO of Kynikos Associates, was sitting in the crowd.

Keep reading: Bill Ackman's Big Pharma Trade Is Making Wall Street A Super Awkward Place - Business Insider.

Cross posted at Market Shadows.