"PershingSquare 3.0": Bill Ackman retreats from activist short selling

Short selling drew a lot of attention to Pershing Square
Pershing Square is permanently withdrawing from the industry
Ackman is now going for a quieter approach – “Pershing Square 3.0”

Ackman’s fight against Herbalife

In 2018, Ackman’s five-year battle against dietary supplement and personal care maker Herbalife ended. “We exited because we felt the capital could be better used for other opportunities, particularly given the opportunity cost of our time,” writes Ackman in his annual letter to Pershing Square shareholders. The short sale of the company, which Ackman accused of running a Ponzi scheme, culminated in a public slugfest between Ackman and fellow activist investor Carl Icahn on the same news network, CNBC reports.

“Despite our limited involvement in this investment strategy, it has generated tremendous media attention for Pershing Square. In addition to massive media success, our two brief activist investments managed to inspire a book and a film,” Ackman wrote in his letter, likely alluding to the fact that the story that inspired Scott Wapner’s book When the Wolves Bite: Two Billionaires, One Company, and an Epic Wall Street Battle.

Pershing Square is entering a new era

But that should now be the end of it. “Fortunately for all of us, and just as important to our reputation as a supportive, constructive owner, we have permanently retired from this industry,” writes Ackman.

In his letter, he divides Pershing Square’s history into distinct time periods: “In considering our history of corporate engagement, we have previously described two eras of Pershing Square: (1) the early days since our inception as Pershing Square 1.0, or transactional activism, when we Invested in undervalued companies with which we have been able to create significant shareholder value by catalyzing corporate events such as spin-offs, strategic asset or corporate transactions and/or changes in tax or corporate structure; and (2) Pershing Square 2.0, beginning with ours Investing in General Growth Properties, where we joined the Board of Directors and helped create shareholder value from an insider’s perspective and influence.”

And so it’s about to usher in a sort of new era in which Pershing Square wants to focus on longer-term, quieter investments. “In our nineteenth year since our inception, we have had the opportunity to meet many directors and management teams, and we have built a reputation as a constructive, long-term and supportive owner,” said Ackman. “The world of large-cap public companies is small, and as such our reputation as a prudent investor is well known among CEOs, boards of directors, and others who matter. The result is that all of our interactions with companies over the past five years have been cordial, constructive and were productive,” explains Ackman in his letter – and it should stay that way, because it makes “work easier and more fun” and improves the quality of life. “So if it’s helpful to call this quieter approach Pershing Square 3.0, be anointed,” the stock market expert writes.

Ackman relies on these companies

The list of companies in which hedge fund firm Pershing Square Capital Management invests isn’t particularly long. At the end of the fourth quarter of 2021, Ackman held foodservice investments in Domino’s Pizza, Chipotle Mexican Grill and Restaurant Brands International. In addition, the US real estate company The Howard Hughes, the hotel chain Hilton Worldwide and the hardware store chain Lowes Companies were in the portfolio of the hedge fund manager.

In January 2022, Ackman also bought more than 3.1 million shares of Netflix stock when the stock price fell sharply as investors worried about the streaming company’s weak subscriber growth after the results were released. According to its own statement, Pershing Square Capital Management has become one of Netflix’s top 20 shareholders.
However, the joy was short-lived: After Netflix scared away investors again with its figures for the first quarter of 2022 and the stock ended trading last Wednesday at a discount of 35 percent, Ackman drew the consequences and separated, like the news agency Dow Jones reported back on its Netflix stake – with a loss of around $400 million. Ackman said Pershing Square had lost confidence in its “ability to predict the future prospects of the company” and that when he discovered new information that conflicted with his original thesis, he himself sought “to act immediately.” agreed.

In addition, Pershing Square recently built a new stake in the Canadian Pacific Railway.

According to Ackman, at the time of his annual letter to shareholders – before he exited his Netflix position – about 30 percent of the stock portfolio was invested in music and video streaming (UMG and Netflix), 26 percent in restaurants and dining Franchising (Chipotle, Restaurant Brands and Dominos), 15 percent in hardware stores (Lowes), 10 percent in “Real Estate in Significant Immigrant States” (The Howard Hughes) and in residential mortgages (Fannie Mae and Freddie Mac), 10 percent in Hotels -Franchising (Hilton) and 8 percent in a railroad company (Canadian Pacific Railway).

“We expect that each of these companies will continue to grow in revenue and profitability over the long term, regardless of recent events and the various other challenges that the world will face in the short, medium and long term,” Ackman said in his letter its investments and the new direction of the hedge fund company.

Editorial office finanzen.net

Image credits: Bryan Bedder/Getty Images for The New York Times