On Tuesday, shareholders in Automatic Data Processing formally voted on the merits of Bill Ackman as an investor and human being, along with the peripheral issue of whether to add a few Pershing Square-endorsed members to the company board. The verdict for both was negative. Here's how Ackman spun it:
“We came in peace,” Mr. Ackman said after his defeat at the meeting. “The point I would like to make is we believe it’s a very significant amount of shareholder support.”
In contrast, here's ADP CEO Carlos Rodriguez:
“Bill…despite your characterization of the result as close, what I was told was this was an ‘ass-whooping,’” he said.
So it goes in the pitiless world of human resources data administration. Ackman knew what he was signing up for when he amassed a $2.3 billion stake in ADP with the hope of shaking up a management that has no interested in being shook up. He played fast and loose, and occasionallydirty. He caught a lot of grief and even more clicks. He did somemath.
And now it seems it was all for naught. State Street and Vanguard reportedly went with the company, overpowering the many votes of BlackRock, which stuck by Ackman. Yet still the market seemed to discount an Ackman victory. Just as ADP spiked when Ackman's stake became public in late July, it fell Tuesday when his jihad failed. So now what?
It's time for Bill Ackman to buy more ADP. Back when his investment first came to light, we argued that it was a perfect time for Ackman to sell. The stock was up double-digits in a matter of days, and given how things have gone for Ackman's past few major positions, that's a perfectly respectable place to exit. Of course, it might look bad to trade on the last shards of your own reputation, and it probably wouldn't be a replicable strategy. But what else is there?
So now that Ackman's ADP gambit has failed utterly, it should follow that the present is a perfect time to get into ADP. This is doubly true given the proxy-vote-induced drop in ADP shares Tuesday, likely to dissipate once investors realize there's more to life than following Bill Ackman. (And really, who looks at Valeant and Chipotle and thinks, yes, please bring that special Ackman je ne sais quoi thisaway?)
Ackman needs to do something bold and counterintuitive here, just as he did when he exited-without-really-exiting his Herbalife short last week. He's indicated that losing the ADP vote remains a moral victory, since investors are now aware of how shitty a company it is. So why not trade on that moral victory?