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.
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PS Ackman was also very big on selling off the CC portfolio which happened. And was a bigt dud. TGT management is still a long way off on any sort of sale leaseback which did not work with MCD. He is 0 for 1 and likely to be 0 for 2 on sale leasebacks.
He waited 6 years on ABK and MBI before those paid off (in a rather big way). Although it now seems unlikely he will have to make due on his promise to give his proceeds to charity when MBI goes to zero.
Please don’t ever talk about Pershing Square and Pirate Capital in the article.
did you see the hilarious ads for filminvest.com on BBG?
I’m still laughing. Paging vegetable capital indeed.
as of Jan 15th, pershing square now owns 80,511,667 shares of Target, holding 9.9% of the outstanding shares. they are the largest 13F shareholder.
thats a market value of $4,246 billion.
“as of Jan 15th, pershing square now owns 80,511,667 shares of Target, holding 9.9% of the outstanding shares. they are the largest 13F shareholder.
thats a market value of $4,246 billion.”
Actually, I think you have forgotten that some of that is in options.
NONE of the $4,246 billion I mentioned is in options. They increased their total share count to this figure.
any option exposure (which is not filed in 13F’s) is additional.
so yes, they may have another $1bn or much more exposure via options.