Billionaire John Paulson and other hedgies who piled into the year's biggest takeover may have played a role in the massive stock sell-off.
Paulson and other big Shire shareholders got a shock on Wednesday when drug giant AbbVie said it might reconsider its $54 billion merger with Ireland-based Shire because of the US crackdown on so-called tax inversions.
The abrupt about-face sent Shire's shares in the US down 30 percent, causing Paulson & Co. to lose more than $700 million on paper. The firm held a $2.3 billion position in Shire across four funds with a combined $10 billion in assets. Paulson also has a smaller position in AbbVie.
Paul Singer's Elliott Management also took a hit on Shire, losing around $300 million.
Traders believe big Shire shareholders held positions on margin and needed to sell other stocks to cover their margin calls.
Despite political headwinds, Paulson urged AbbVie to push ahead with the deal.
"The combination is both strategic and accretive regardless of the tax considerations," he said. "We hope the AbbVie board reaffirms its commitment to the transaction after its review."
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