Pershing Square Holdings Market Cap (as of 31/10/2014): $6.181bn
Pershing Square Holdings, the hedge fund company founded in 2003 by Bill Ackman, the activist investor and Harvard alumnus who boasts a $1.2bn net worth, raised $2.73bn floating for the first time in the Euronext Amsterdam on October 13th. The fund, with more than $14.1bn assets under management, was able to exercise an over-allotment option to raise more than $3bn. With a price of $25 per share, Pershing Square has a market capitalization of around $6bn.
With his personal funds and with funding received by his former business partner, the real estate arm of Leucadia National, Bill Ackman became fund manager at Pershing Square Capital Management, headquartered in New York , currently providing advice and execution for investments in public equity and fixed income markets across the globe, using fundamental analysis and investing in value stocks with the help of external sources of research. Mr. Ackman’s investing philosophy reflects his strong interest in philanthropy: he is defined to be sharply different from Carl Icahn and much more similar to Warren Buffett, since the Oracle of Omaha is well known for its growth-centric approach, favouring also the economy as a whole.
Starting from investments in mid-size companies with low financial leverage and diversifying the portfolio across industries, with a sixty per cent in consumer goods and services, Pershing Square in 2005 bought a notable stake in the fast food chain, Wendy’s International. After Wendy’s board spun-off the Canadian coffee chain, Tim Horton’s, Ackman sold its stake in the fast food chain making a huge profit and causing the fall of the stock price, which resulted in strong criticisms from other investors.
In 2009, Pershing Square started niche investments in large cap stocks, but after a $1.9bn loss on the investment in Target Corp. and the bankrupt of Borders Group, Ackman had to apologize and was blamed of overconfidence.
Pershing Square Capital Management LP is also well known for its $1bn short position in Herbalife since 2012, which caused huge losses for the fund. Even though Herbalife’s stock is keeping its momentum, Ackman is still strongly convinced that it is bound to fall, but due to criticisms, he has hedged the position buying a put option, as declared in a letter to investors.
Owning a 24% share in Platform Specialty Products Corporations, which went public in January 2014, Pershing Square is the majority shareholder and has recently announced a deal to acquire Chemtura, the Philadelphia headquartered agrochemical business, for $1bn.
The motivation behind the IPO is to raise a permanent capital base that would not be susceptible to redemptions from investors. As a hedge fund, Pershing Square could be quite vulnerable to redemptions from investors, which means that if investors pull their stake from the fund, it would have to unwind its massive positions to repay investors. Some estimate that it would take Pershing Square over two years to successfully unwind all positions and return all the capital to investors in the closed-end fund. However, now Pershing Square has a $3bn permanent capital base.
Currently, Pershing Square is involved in two complicated investments: its stake in Allergan, the Botox manufacturer, and in Freddie Mac and Fannie Mae, the government-sponsored secondary mortgage market makers that were bailed out in a $187bn bailout during the 2008 financial crisis. With Allergan, Ackman is working with Valeant Pharmaceuticals who has unsuccessfully bid for the Botox maker and has kept raising the offer since. Ackman is pushing the board to accept Valeant’s bid, which he deems to be in the best interest of the shareholder. As of now, Pershing Square has amassed a 10% stake in Allergan, representing over $5.3bn. However, the board disagrees with Ackman’s stance on the issue, so much so that it is contemplating barring Pershing Square from voting on Valeant’s takeover bid.
Concerning the position in Fannie Mae and Freddie Mac, Ackman has filed a lawsuit during the summer against the United States Federal Government, asserting that the revised terms of the 2008 bailout cheated investors out of the profit. Numerous lawsuits have been filed over this matter, asserting that it is against the U.S. constitution’s fifth amendment, “which prohibits the taking of private property for public use without just compensation” according to an attorney at Jones Day, who is representing Pershing Square and other complainants.
Both Freddie and Fannie have sent more than the bailout amount back to the U.S. Treasury, yet the funds were counted as a return on the U.S. investment rather than full repayment of the aid. Although Pershing Square is not the first to file a lawsuit over this diversion, it is the largest shareholder in both companies, owning about 10% of the common stock in each company. Given Pershing Square’s large position in the firms, the lawsuit without a doubt will be closely watched, and could be detrimental to Pershing Squares performance.
Key investors after the IPO are Qatar Holdings and Rothschild Bank AG and Rothschild Wealth Management UK, with the first buying $141m and the latter buying $273.9m worth of shares.
Pershing Square’s past investments raised several risks as Ackman clashed with several investors and companies around the world.
Deutsche Bank AG and UBS AG managed the IPO. Placing fees and other costs of the sale will total $95.5 million, according to the prospectus.