One reason so many on Wall Street have been riveted by Mr. Ackman's wrong-way Valeant bet is that it seems to confirm an age-old investing truth: Karma has everyone's address.
For example, Mr. Ackman's $4 billion loss in Valeant more than wiped out the $2.2 billion he made in 2014 on Allergan.
Mr. Ackman had never invested in the pharmaceutical industry when he put over $3 billion into Allergan. Pershing had avoided such companies, Mr. Ackman told investors in April 2014, because they don't generate predictable cash flows. Pershing preferred companies like Burger King and Kraft, whose strong brands protected them from competitors.
After generating a quick $2.2 billion profit in Allergan, Mr. Ackman continued his new interest in pharma. In March 2015, Pershing began putting about $4 billion into Valeant.
Initially, Mr. Ackman swooned over the company. At an investing conference in May 2015, he said, "We spent a year working with Valeant trying to take over Allergan, and one of the frustrations we had, as we got to see Valeant trading at $110 a share, was that we couldn't buy the stock."
He added: "But the moment we could, we bought it. You could say we're late to the party."
Mr. Ackman was more correct than he knew about coming late to his big Valeant purchase. His average cost was $190 per share.
At first, the investment scored. On July 23, 2015, Valeant reported blowout financial results; by early August, the stock had topped $262 a share.
Although few suspected it, that was the zenith for Valeant. By September the stock had fallen to around $160.
In October came a report from Citron Research, by the short-seller Andrew Left. Its headline: "Valeant — Could This Be the Pharmaceutical Enron?" The report delved into Valeant's association with a shadowy specialty pharmacy operation known as Philidor. Valeant shares skidded to $110 on the news.
On Oct. 30, Mr. Ackman battled back with a four-hour conference call defending Valeant. The company was sound, he said, and although its stock would recover slowly, he expected it to hit $400 within three years.
Investors weren't convinced; the stock closed down 16 percent that day.
"We held the call to respond to a large number of investor questions we received," Pershing Square said in an email last week to The Times. "We presented our point of view and analysis based on the facts that we had at the time. We continued to hold the stock at that time because we believed there continued to be substantial upside on our investment."
From then on, Valeant was essentially in free fall. In late December 2015, Mr. Pearson took a medical leave. In March 2016, Mr. Ackman joined Valeant's board and the company announced it would replace Mr. Pearson. Hauled before congressional hearings about escalating drug prices in April, Mr. Ackman apologized for Valeant's mistakes, vowing to use his position on the board to change the company.
As Valeant's business flagged, investors began focusing on its $30 billion debt, taken on to acquire companies. Clearly the company was going to have to sell assets to pay it down, but as analysts noted, Valeant had typically overpaid for acquisitions; selling those units might not generate gains.
Mr. Ackman continued to defend Valeant publicly, an unusual stance for a corporate director. In May 2016, after Charlie Munger, Berkshire Hathaway's vice chairman, criticized Valeant's business model and called the company "a sewer," Mr. Ackman took to CNBC. And in July of that year, he told an interviewer that Valeant's phone was ringing off the hook because so many companies wanted to buy the assets it was selling.
By this time, the stock had drifted down into the $20s. The company's business was faltering, and it was under investigation by regulators and the Justice Department, inquiries that had come about before Mr. Ackman joined the board and are continuing. For 2016, Valeant reported a $2.4 billion loss.
Last Monday, Mr. Ackman had had enough. Pershing dumped its Valeant stake at roughly $11 a share.