Pershing Square IV was a special vehicle set up entirely to invest in Target (TGT) and pursue an activist strategy. Ackman raised nearly $2 billion and over time invested the vast majority (about two thirds) in call options with strike prices ranging from $41-$53 and almost 6 million shares at around $59. Near the end of 2007, with the stock price flirting around $50 one can only assume that a good bit of the value in the options had collapsed. This puts Pershing Square IV on top of some rather serious, unrealized losses. Ackman sold some of the lower strike price calls earlier this year and realized some losses, but, at least as of the latest filings, he is dealing primarily with paper losses.

Ackman's investors in Pershing Square IV (primarily Ian Cumming and Joseph Steinberg's Leucadia National- their relationship with Ackman goes back to 1995) agreed to a long lock-up period (as late as 2010) to see the activist value play through, (not unusual in the business, you don't want pesky limited partners taking capital away while you are in the middle of a big fight- Pirate Capital learned this the hard way) so one assumes that the unrealized losses showing at the end of 2007 have to be shrugged off for a time. In fact, given the drubbing Target took after the holiday season, one wonders if Ackman hasn't been increasing his position, though his cash reserve is rather limited in Pershing Square IV.

If Ackman stays true to form, it's the real estate holdings in Target's portfolio that he bases his investment thesis on. Still, his $120 a share target is a long way off.

Time will tell.