Bill Ackman

  • 09 Jan 2013 at 4:17 PM

Dan Loeb Gets In On “The Best Managed Pyramid Scheme In The History Of The World” At A Discount

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An important truism in the financial markets is that there’s no such thing as a “toxic asset,” tout court; everything is toxic/dangerous/Bad at some (high) price and attractive/safe/Good at some other (much lower) price and there’s a wide area in between where things mostly live and you fight about their pricing. You can apply that insight to junk bonds or CLOs or really any number of things, and you should, but today it’s sort of fun to apply it to Herbalife. As far as I can tell the argument over Herbalife goes something like this:

Herbalife opponents: Herbalife is a horrible pyramid scheme that preys on disenfranchised, mostly poor and minority people and convinces them to part with their life savings through misleading advertising and high-pressure sales techniques.
Herbalife supporters: True! And … ?
Opponents: And therefore it will be shut down by the FTC and the stock will go to zero.
Supporters: That’s … wow, that’s just hopelessly naive. I’m gonna go buy some HLF.

Today CNBC’s Herb Greenberg has a good statement of the “horrible pyramid scheme” case, which of course has been most memorably taken up by Bill Ackman, who is betting a billion dollars on “shut down by the FTC and go to zero.” And last week Bronte Capital’s John Hempton gave the classic statement of the “hopelessly naive” case.1 As one Herbalife shareholder put it when I asked if he thinks HLF is a pyramid scheme, “in the colloquial sense, yes; in the legal sense, no.”2

Here’s how another Herbalife shareholder put it today: Read more »

  • 03 Jan 2013 at 2:00 PM

Even When Bill Ackman Loses, He Makes A 77-Fold Return

By Jon Shazar

With his attentions now focused elsewhere, Bill Ackman has no time to make three-hour presentations about why Canadian mall owner General Growth Properties should be sold, post-haste. Also: The company he wanted to buy GGP* didn’t want it anymore. So he’s picking up his toys and going home. Read more »

  • 20 Dec 2012 at 2:22 PM

Bill Ackman Full Of Praise For Company He Thinks Is A Blood-Sucking Pyramid Scheme

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Well, the praise was brief but extravagant, specifically “this is the best managed pyramid scheme in the history of the world,” which I at least would be proud to have on my resume, but I might be in the minority there. What do you think Ackman’s goal was in this morning’s 340-slide, nineteen-hour Herbalife presentation featuring phrases like “Shane’s going to come up here and talk about the accounting again” and “now I’m going to bring on our lawyer for the next 200 slides” and “here’s where it gets really interesting: shipping and handling,” and, at the 2 hour 28 minute mark, “feel free to go to the men’s room, ladies’ room, it’s at the top of the stairs, but I’ll keep going”?1 Ackman thanks several team members for working tirelessly for a year or more on this presentation, and if you watched all of it you have a pretty good sense of how they must have felt.

One model of this fight is that Ackman and Herbalife are attempting to wage regulatory battle by proxy. Presumably some SEC and FTC lawyers are watching this and the respective hopes are:

  • Ackman hopes that the Federal Trade Commission will conclude that Herbalife is a pyramid scheme and shut it down, bringing the stock to zero-ish and making him a zillion dollars on his short position, and
  • Herbalife hopes that the SEC will conclude that Pershing Square is a market-manipulation scheme and shut it down, causing HLF’s stock to soar.2

Neither, either, or both of these things could happen, I suppose; the FTC and the SEC are their own dogs and so you could have each running around investigating one of the protagonists here. But generally relying on a regulator is sort of a dicey proposition; even if you’re right, the regulator may have better, or possibly worse, things to do with its time than inflicting pain on your adversaries. So what does that leave you? Read more »

Bill Ackman Does Not Act, Bill Ackman Feels Deeply (And Does Not Appreciate The Insinuation Otherwise, THANK YOU VERY MUCH)

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As we have discussed at length, when it comes to the art of regulating one’s emotions while investing, there are two models to choose from: The Dead Inside paradigm, wherein you remain calm, cool, and collected, maintaining the same expression on your face whether you’ve lost $1 billion on one trade or made three times that much on another; and The Bill Ackman. The mega-successful Pershing Square founder imbues emotion in everything he does, particularly when it comes to his job. As a man who wears his heart on his sleeve, in the past Ackman has been known to: cry at shareholder meetings; get extremely heated to the point of his face becoming “flushed,” his eyes “misty” when meeting with SEC investigators; pen “long, emotional, late-night missives” to top SEC brass; and erupt on directors of companies with such passion that his “furious outburst” could be “heard in an outside hallway.”

As there are few on Wall Street who exhibit such raw emotion while conducting business, and there is a propensity by some to employ tactics that will put them in the power position when facing foes, perhaps it should not come as too much of a shock that recently, a reporter asked Ackman whether or not the waterworks or displays of indignation are pre-planned, in front of a mirror. For those who’ve long known Ackman has more integrity in one salty tear than most have in their entire body, his answer will not come as a shock, but to set the record straight, for anyone holding out hope of seeing him do a little regional theater at some point in the future: Read more »

  • 05 Sep 2012 at 1:24 PM

First Class Customer Service At Marea Means Never Seating Bill Ackman Next To A CSMFPOS

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Increasingly, restaurants are recording whether you are a regular, a first-timer, someone who lives close by or a friend of the owner or manager. They archive where you like to sit, when you will celebrate a special occasion and whether you prefer your butter soft or hard, Pepsi over Coca-Cola or sparkling over still water. In many cases, they can trace your past performance as a diner; how much you ordered, tipped and whether you were a “camper” who lingered at the table long after dessert…Much of this information is discreetly embedded in an alphabet soup of acronyms that pops up on the computer screen when a restaurant employee checks you in, managers and employees at a number of high-end New York restaurants said in interviews. The wine whale may show up as WW. If a free appetizer lands on your table at Osteria Morini in SoHo, chances are your file says SFN — something for nothing…At Marea, Michael White’s Italian restaurant on Central Park South, for instance, the hedge fund manager William A. Ackman is a regular and one of many customers who rates an NR, never refuse. What the computer does not say (but the general manager, Rocky Cirino, knows) is that servers can never seat Mr. Ackman next to Carl C. Icahn, another big Wall Street name. The two have sued each other. [NYT]

  • 24 Aug 2012 at 1:29 PM

Bill Ackman Has A Lot To Say About General Growth Properties

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It’s August, things are slow, and I have a suspicion that Carl Icahn let his lawyers go on vacation and is just writing his two-sentence letters to CVR Energy himself. Bill Ackman, not so much:

To the Board of Directors of General Growth Properties:

… [eight pages] …

I look forward to speaking further with the Board about the above.

He even cc’s a lawyer.*

The saga here is long and winding; the letter actually explains it well or you could read this Reuters article but in sort-of brief:

  • Pershing Square is the second-largest shareholder of GGP, with 7.7% of the company, or 10.2% on Ackman’s somewhat aggressive accounting**
  • The largest holder is Brookfield Asset Management, with 38.2% plus warrants for 4% more.
  • Pershing and Brookfield got their shares mostly in the process of helping GGP out of bankruptcy, which it was in due to some unpleasantness over some loans, but it’s doing great now thanks for asking.
  • But keep in mind: Read more »
  • 15 Aug 2012 at 6:15 PM

SEC Wants Activist Hedge Funds To Share With The Rest Of The Class

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Financial markets are basically about information asymmetries, real and imagined, and financial regulation is largely about limiting those asymmetries to socially acceptable kinds and quantities. A general rule for trading success – perhaps the only useful rule for trading success – is: if you know something that nobody else knows and that will increase the value of a stock, then you should buy that stock! Afterwards, you should tell people. If you know something that will decrease the value of a stock, same thing, but with selling. If you don’t know anything that nobody else knows, index.

If you follow that rule too closely, though, you will end up in jail, as one does. So the trick is to know what kinds of secret information it’s okay for you to trade on, and what kinds it’s not okay for you to trade on. This is actually much harder than most people think it is,* which is why Doug Whitman is on trial.

My favorite category of nonpublic information that it’s maybe okay to trade on is your own intentions. If you wake up and say to yourself “I’m going to buy J.C. Penney stock today,” then right there you have an information advantage: you know something that no one else does.

Of course, who cares? In expectation, (1) you’re poor, so you’re not buying enough JCP stock to push up the price, and (2) you’re stupid, so your opinion of JCP won’t change anyone else’s view on the fair price. But occasionally you – not you you, but the “you” in this sentence – are rich and smart, and then your intentions are actually valuable information. One way you know that they’re valuable information is that stealing them is illegal: if Warren Buffett is secretly planning to buy Lubrizol, and his deputy knows about it, the deputy probably can’t go around buying Lubrizol. Another way to know: when Warren Buffett or Bill Ackman announces a position in a stock, the stock usually goes up.

So: is it okay for Bill Ackman to profit from his knowledge that he wants to buy J.C. Penney stock? Or does he need to tell everyone about his plans before he executes them, so that everyone can adjust their price in light of the knowledge that there’s a big buyer? Obviously you can’t arrest Ackman for insider trading because he traded on his knowledge that he was going to trade. (There are degenerate cases where you can come close.**) But you can argue about whether he owns that information and should therefore be able to profit from it, or whether instead that information should be public so he can’t take advantage of it at the expense of unwitting public investors who would have held out for a higher price if they’d known he was the buyer.

Harvard professor Lucian Bebchuk has a column in DealBook today about how the SEC shouldn’t prevent activists from secretly buying shares in companies. Read more »

  • 12 Jul 2012 at 5:30 PM

Mitt Romney, Bill Ackman Undone By Forms

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Let’s talk about two tenuously related stories about government filings, why not. I don’t have much to say about this Mitt Romney Bain thing today but go read it, it is fascinating. Basically Mitt Romney certified under penalty of perjury in some federal electoral forms* that he was not involved with Bain Capital after 1999, and he also certified under penalty of perjury in some SEC forms that he was CEO of Bain Capital from 1999 to 2002, so by the fallacy of the excluded middle (?) he is definitely guilty of a federal felony,** which sounds terrible until you realize that so is everyone else, really, because breathing air is a federal felony, but this is a different obsession of mine.

Anyway Dan Primack is defending Romney and basically saying “being the CEO of some old fund for SEC filing purposes is not the same thing as actually running a private equity firm, and you can tell from the fund marketing documents that he wasn’t actually running it,” which I suspect is roughly correct as a matter of his working life, and as a matter of acquitting him of felonies, though also not entirely politically palatable – “when I said I wasn’t involved with Bain Capital after 1999, I meant except for being CEO,” etc. etc.

Moving on quickly to the other piece of federal filing arcana: Bill Ackman is buying some P&G stock so he can sell shampoo at Burger King or something. Buy! Or sell! Or something. But the weird thing to me was: how often do you see a story that is like “activist investor is granted early termination on HSR filing”? Is “never” the right answer? Maybe? Read more »

Bill Ackman: Where We’re Going, We Don’t Need Roads

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The principal weakness we share with most other money managers is the fact that our capital base is not permanent, and we therefore keep cash on hand and/or own passive liquid investments which we can sell to meet potential investor demands for capital. To address this weakness in our open end hedge fund structure, later this year, we intend to launch the private phase of Pershing Square Holdings, Ltd., which we expect to eventually list on the London Stock Exchange…In [the cases of Canadian Pacific, JC Penney, Justice Holdings and General Growth], we had the resources to effectuate the necessary change and the capital commitment from investors who were willing to wait for the changes to be implemented. During the course of each investment, however, there have been periods of enormous skepticism both from the investing public at large and, presumably, from some of you who are invested in the Funds…The Pershing Square funds have been a large beneficiary of our ability to take advantage of periodic market skepticism by increasing our ownership at more favorable prices. Volatility is the friend of the unleveraged long-term investor. We much prefer the bumpy road to higher rates of return than a smoother ride to more modest profits. Read more »

Give A Bill Ackman A Fish And You’ll Feed Him For A Day. Teach A Bill Ackman To Fish And He’ll Hire You To Work At Pershing Square. (Ditto Re: Tennis Lessons.)

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How do the world’s leading hedge fund managers go about assembling their teams? While some choose the standard head hunter and “pitch me a stock” route with candidates who’ve had at least a few years of business experience and proven track records, others prefer a more outside the box approach. Bridgewater Associates, for instance, has said that instead of going after veterans of Wall Street, it likes to hire people straight out of college, when their minds are still malleable. Founder Ray Dalio has stated: “Interest in the subject matter is a minor consideration…We are first interested in people’s values, second interested in their abilities, and least interested in their precise skills. We want independent thinkers who are willing to put aside their egos to find out what is true.”

Similarly, Pershing Square’s Bill Ackman, who has never been one to follow the crowd, eschews the typical hiring process in identifying talent. Instead, Ackman relies on gut instincts when it comes to making personnel calls, many of which occur outside the confines of the investing world. For example, one former analyst named Oliver White was hired after serving as Ackman’s guide on a fishing expedition in Tierra del Fuego. (Per Christine Richard’s Confidence Game: “For six days, Ackman and White, a philosophy graduate from the University of North Carolina at Chapel Hill, talked and fished. White explained technical details to Ackman about fly selection, casting the line, and luring the fish. Meanwhile, Ackman spotted the next member of Pershing Square’s investment team. “At the end of his stay, he asked me– no, he told me– I should come to New York and work for him.”) While Ackman was obviously impressed with White’s talent, it seems the offer was made on the basis of spending six days peering into the guy’s soul and seeing something special he knew in his plums would carry over into activist investing, rather than as a barter deal for White to teach Bill his craft, which is another way people have been hired at the fund. Read more »

  • 13 Apr 2012 at 4:58 PM

Dear Pershing Square Investors

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March performance. Read more »