MoxVlog

With Vivek Ramaswamy rising fast in the 2024 presidential primary polls, his pre-politics career as a biotech entrepreneur has faced growing scrutiny over allegations of pump and dump tactics. But one crucial part of his past has so far been overlooked: his short but extremely lucrative stint on Wall Street as a hedge fund investor.

Our team carefully mined the Securities and Exchange Commission's filings archives and Ramaswamy's own prior statements to recreate and analyze some of his investment history on Wall Street. What we found was shocking.

While he was at Yale Law School, Ramaswamy also worked for a hedge fund, QVT Financial. In the span of one year, Ramaswamy and his company invested in three companies—Pharmasset, Inhibitex, and Anadys, all firms in the highly esoteric field of hepatitis C treatments within biotech. And they were all acquired in major takeovers, with Ramaswamy fortuitously buying in or dramatically upping QVT's stake right around the time secret acquisition talks began in every case.

Ramaswamy's investments achieved massive returns—close to 5,000 percent by some measures, generating millions of dollars for QVT Financial; Ramaswamy's annual income also jumped during this period, from modest five and six figure salaries to more than $2.2 million in 2011 and $1.9 million in 2012, according to his own tax returns. And these were not tiny bets: In each of these three cases, at some point during the time the stock was held, Ramaswamy/QVT was either the single largest investor in the stock, or the stock was Ramaswamy/QVT's single largest position in the portfolio. Not even John D. Rockefeller, Elon Musk, Peter Thiel, Steve Schwarzman, or Warren Buffett have had such whopping returns.

Was it dumb luck? We don't have evidence of insider trading. But certainly, Ramaswamy's timing could not have been better in each of these cases. And while QVT held hundreds of positions at each of these times, each of these three bets were either Ramaswamy's largest position at the time or Ramaswamy was the single largest shareholder in the stock, making their extravagant success noteworthy.

When we reached out to Ramaswamy for comment, his deputy Tricia McLaughlin responded on Twitter with an ad hominem attack—as his team has before when facing criticism we've raised in the press in the past. "This kind of unhinged vengeance and obsession is not healthy," McLaughlin wrote on Twitter, without answering our underlying substantive questions.

Did Ramaswamy merely ride the wave of hepatitis C speculative mania taking place at the time? It would be hard for that to explain away his suspiciously good timing. Certainly, the six biotech peers and experts on securities law and corporate governance with whom we shared our findings all found Ramaswamy's lucky timing improbable.

Ramaswamy's success "looks less like lucky investing and more like a known playbook he was reading from," noted biotech investor and former Theranos whistleblower Tyler Shultz told us. "It certainly raises eyebrows given the repeated pattern." Bill George, the former CEO of Medtronic, agreed, telling us these findings showed Ramaswamy to be "a classic pump-and-dump guy who has not achieved on his own."

Several experts on corporate law and accounting were just as stunned. "I am perplexed that the SEC has not investigated these transactions with respect to insider trading," Norman Bartczak, a financial accounting professor at Columbia Business School and adjunct professor at Columbia Law School, said. Meanwhile, Howard Shecter, the legendary corporate attorney, senior M&A counsel at Holland & Knight, and former managing partner of Morgan, Lewis & Bockius, said that Ramaswamy's trades are "evocative of SAC [Steve Cohen's hedge fund] and other notorious traders on inside information."

As renowned corporate governance pioneer, former President of ISS, and Vice Chair of ValueEdge Advisors Nell Minow put it, "Ramaswamy's partners, investors, and government regulators should have asked some hard questions about these transactions, which seem, as the British say, too clever by half. Now, he should get those hard questions from the journalists who cover Presidential politics, his opponents in the race for the nomination, and most definitely, from the voters."

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When you look at Ramaswamy's investments in the three companies that raised eyebrows with the experts we consulted, each was a speculative biotech firm focused on developing hepatitis C treatments that was ultimately purchased by a bigger company soon after Ramaswamy's hedge fund invested millions of dollars—just as secret merger talks commenced each time.

Ramaswamy's initial effort came with Pharmasset, of Princeton, New Jersey, which traded under the ticker VRUS. As Ramaswamy himself claimed in previous interviews, he began buying shares on behalf of QVT Financial in 2008, when the stock was trading at $5 a share. "By the time Gilead decided to acquire the company in 2011 for about $137 a share, Ramaswamy was one of Pharmasset's top shareholders," gushed one profile of the investor.

But we found some suspicious timing behind those trades. Our review of the merger negotiation disclosures retroactively filed with the SEC reveals something that was not publicly accessible information at the time: The potential acquisition of Pharmasset first started coming together around September 2010, when the Pharmasset Board brought on Morgan Stanley as the company's financial adviser in response to unsolicited takeover bids which were not made public until after the final deal.

Beginning in early 2009, QVT had been steadily selling down its Pharmasset shares as the stock trickled upwards. But in the fourth quarter of 2010 and the first of 2011—notably the weeks and months after Pharmasset brought on financial advisors in response to unsolicited, nonpublic takeover bids—Ramaswamy's firm reversed course and started increasing its holdings in Pharmasset, adding over 114,000 shares. Combined with gains in the value of his existing holdings, that brought Ramaswamy's total stake of Pharmasset to a whopping $115 million, more than two times larger than his earlier holdings, making Pharmasset QVT's single largest stock position. Ramaswamy sold out of the stock as the stock price rose in the months leading up to and after the deal, eventually selling out fully after the acquisition was made official, for gains of 2,700 percent from when he first started buying Pharmasset.

This was an unusual investing move at the time. Our review of original Wall Street research reports from that era suggest Pharmasset was largely unloved by sophisticated institutional investors, scientists, and biotech industry experts. UBS had expressed concerns over the company's valuation as did Roth Capital Partners, while others such as Morgan Stanley bemoaned its heavy financing needs.

Ramaswamy's contrarian coup on Pharmasset—buying into and doubling down on an unloved stock and reaping 2,700 percent gains on his initial investment when the company was acquired—is impressive enough for any investor. But as a profile of Ramaswamy pointed out, he repeated this drill within months, in almost identical circumstances.

Ramaswamy's second incredible move was his investment into Inhibitex, ticker INHX. He first started buying shares on QVT's behalf for about $1 in 2009 and purchased warrants to acquire millions more shares at $1.46 each. In early 2012, Inhibitex was purchased by Bristol-Myers Squibb for $26 a share, a whopping 163 percent premium on the pre-deal closing price of $9.87. Once again, Ramaswamy started selling out of his position as soon as acquisition rumors emerged publicly and completely sold out his stake to zero after the merger was announced, making 2,500 percent gains on QVT's initial investment.

As with Pharmasset, the stock was unloved by biotech experts and sophisticated Wall Street analysts, with firms such as BMO expressing concerns over cash burn at the time. And perhaps Ramaswamy was just making a very smart, against the grain contrarian bet. But a deeper look paints a more complicated picture: QVT had first bought Inhibitex in 2006, but sold out of the stock completely in late 2008. Then, in late 2009, Ramaswamy suddenly bought back into Inhibitex, purchasing more than triple the shares QVT had previously owned and becoming the single largest investor in the biotech company.When we reviewed the merger negotiation disclosures retroactively filed with the SEC, we found that initial, non-public discussions surrounding a transaction first started in November 2009 with the signing of a confidentiality agreement. That quarterwas exactly when Ramaswamy built his large QVT stake, though the merger talks would have been unknowable to the general public at the time.

But in this case, the experts were likely right in the end. Just months after Bristol-Myers Squibb bought Inhibitex, the pharmaceutical giant ended up writing off the deal as a complete waste of money, with Inhibitex's hepatitis C drug deemed a potential threat to human health and safety.

There was a third fortuitously timed QVT investment in the firm Anadys. And though Ramaswamy hasn't claimed credit for this investment publicly, the circumstances surrounding QVT's investment into Anadys were curiously similar to the Pharmasset and Inhibitex investments.

QVT started building a small stake in Anadys, ticker ANDS, and in 2010, it increased its position significantly throughout the year and into 2011, when the stock traded between $1 and $2 a share. In particular, the hedge fund purchased 5 million shares in the fourth quarter of 2010. Mere months later, in late 2011, the Swiss health care company Roche acquired Anadys for $3.70 a share, a 256 percent premium over its pre-acquisition closing price. QVT cashed out quickly, with another significant gain from yet another acquisition-driven payout.

In an eerily coincidental pattern, once again when we reviewed the merger negotiation disclosures retroactively filed with the SEC, we found that Anadys first started meeting with investment banks to explore a potential sale of the company in March 2010 before exclusively engaging with Lazard in May 2010. That was exactly when QVT first started building its stake in Anadys with the purchase of nearly 3 million new shares in the first quarter of 2010 and over 2.6 million additional new shares in the second quarter of 2010, even though the potential sale would have been unknowable to the general public at the time.

In particular, SEC filings retroactively revealed that on October 1, 2010, the CEO of Anadys met with Roche to discuss potential combinations, during the same quarter that QVT was buying 5 million new shares, nearly doubling the hedge fund's pre-existing holdings and making Ramaswamy's firm the single largest investors in Anadys, owning two times more shares than the second largest, even though the stock was unloved among biotech experts and sophisticated Wall Street analysts, with professionals such as Roth Capital expressing concerns at the time that the company was "lost."

In summary, Ramaswamy and his hedge fund somehow pulled off the following sequence of events—not once, not twice, but three times in short order: They bought or increased holdings in a cheap, speculative stock at a time when almost every professional on Wall Street was bearish, while unbeknownst to the general public, non-public merger or sale negotiations were privately taking place.

They then doubled down and kept adding to that stock position despite the stock going sideways or down, with no immediate reward and few bandwagon followers—becoming either the largest single investor in the stock and/or having that stock become the largest single position in his portfolio. Ramaswamy did this even as he was also enrolled full time as a Yale Law School student.

Finally, merely months after buying the stock or increasing the investment in the stock, realized a huge payday when the company was acquired at a generous premium and immediately, completely cashed out afterwards or shortly beforehand, as news started to emerge of potential acquisition.

"It's very strange to have this kind of record in early-stage biotech," Vivek Wadhwa, the CEO of Vionix Biosciences, serial entrepreneur, and biotech commentator told us. "The deal flow is unpredictable, and a lot of drugs fail. But buying in or upping the stakes right as secret merger talks begin, and then cashing out with fast acquisitions three times in a row?"

We want to be clear: We don't have evidence that Ramaswamy or QVT had insider information to make these improbably profitable investments. But considering all three instances shared the same underlying attributes of buying into a stock or significantly boosting its shares right before a merger, at around the same time merger talks commenced privately, the coincidence is rather remarkable. And while Ramaswamy was indeed focused on the biotech industry while he worked at QVT, it seems notable thathe had no substantive hepatitis C background or medical training, nor has Ramaswamy done much with hepatitis C in the years since, raising questions over how Ramaswamy just happened to select these fortuitously timed investments right before their acquisitions.

Given growing concerns about Ramaswamy's history of potentially dubious business practices, which we've written about previously, his stock trading record may warrant more scrutiny, particularly as he asks the public to send him to the White House. The American people ought to decide for themselves whether they find this unbelievable timing suspicious, since Ramaswamy refuses to answer our substantive questions. As we have made clear with repeated requests for comment, we are eager to hear Ramaswamy's explanation for his success.

As the saying goes: Once is an accident, twice is a coincidence, three times is a pattern.

Jeffrey Sonnenfeld is Lester Crown Professor at Yale School of Management.
Steven Tian is research director at Yale Chief Executive Leadership Institute.

The views expressed in this article are the writers' own.

Uncommon Knowledge

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

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