When Bill Ackman first announced he'd followed his apparently irongut and gobbled up a stake in Chipotle last year, he came more or less in peace. He agreed, very uncharacteristically, to keep his mouth shut during negotiations. He managed to get a couple seats on the board without resorting to knuckle-cracking threats. And of CEO Steve Ells – whom Pershing Square never publicly sought to replace — Ackman had only the nicest things to say:
- “He's an outstanding visionary CEO who's has done a great job building the concept, the brand.”
- [After another diarrhea wave] "Steve Ells has an opportunity to humanize the brand and create a vision for how they will address these challenges in the future. It could be something as bold as setting the highest standard for restaurant food safety in the world."
Anyway, that bold, outstanding, visionary leader just threw in the towel:
Chipotle Mexican Grill said on Wednesday it was seeking a turnaround expert to lead the company, replacing founder Steve Ells after he struggled for two years to rescue the burrito chain’s sales and reputation from a string of food safety lapses.
The departing CEO will now become executive chairman of the board. Said Ells:
“Simply put, we need to execute better to ensure our future success. The Board and I are committed to bringing in an experienced leader with a passion for driving excellence across every aspect of our business, including the customer experience, operations, marketing, technology, food safety, and training.”
Ackman, apparently, doesn't mind. “We remain as excited as ever about the future” of Chipotle, he said Wednesday.
And why not? Here's what the company's shares did on the news:
If this pattern looks familiar, recall what happened the last time reality interfered with Pershing Square's vision of how things should go in an activist campaign: ADP. After a monthslong battle of wills stocked with enough oh-no-he-DIDn'tmoments for a season of Real Housewives, ADP shareholders delivered an “ass-whooping,” leaving Ackman without his coveted board seats or whatever was left of his dignity. Accordingly, ADP went way up.
There's a pattern emerging here, and one Ackman should take advantage of. If (1) his investment theses don't work and (2) the opposite of what he says he wants keeps happening, then maybe, by a strange paradoxical process of double-negatives, the current dogs in his portfolio could turn into winners simply by being Ackman's picks. This is an evolution beyond Herbalife and Valeant, say, where the things he'd hoped for did happen (Herbalife's FTC investigation, Valeant's acquisition of Sprout, etc) and then everything went to shit. Now, things occur that Ackman doesn't want occurring, and yet the primary beneficiary is him.
Welcome back, Ack.