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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
At least Bill Ackman recently found one set of receptive investors. Unfortunately, he needed two. On Tuesday, a securities filing revealed that the new US-listed investment vehicle for his Pershing Square empire is now looking to raise a paltry $2bn. The cash is to be primarily used to buy public equities.
The polarising tycoon had as recently as two weeks ago suggested a $25bn target for the offering. Among the indignities suffered by Ackman, the Boston hedge fund Baupost withdrew from plans to anchor the float after its commitment to Ackman had been reported.
In a separate June transaction, however, Ackman had sold a tenth of the Pershing Square investment manager to a group of investors at a $10bn valuation. Pershing Square currently manages about $20bn across its different funds and a mooted $25bn raise in the US would have taken that figure up to $45bn.
Even at that level, a $10bn manager valuation is astounding. For reference, the private equity group Carlyle manages more than $400bn in customer funds and is only worth $17bn.
Moreover, across all its funds, Pershing Square has a basic strategy focused on holding about a dozen stock investments. The fund has selected the likes of Chipotle, Alphabet and Hilton. Ackman also occasionally makes big macro hedging bets, including one just at the outset of the pandemic that proved hugely lucrative.
The new US vehicle is to charge a 2 per cent management fee without a performance fee. Pershing Square already has a Dutch-listed vehicle that, despite trading at a steep discount to net asset value, has over the past six years earned about 30 per cent annually on average. (Just don’t ask about the years preceding that were marred by bets on Valeant and against Herbalife).
The outside backers for the management company include the likes of BTG Pactual of Brazil. Ackman had pitched a net asset value that would steadily grow over time with the possibility of new products, all of which could eventually justify the fees to support the $10bn manager valuation. Now they are stuck wondering what to do with an overpriced minority piece in an illiquid manager.
Ackman has in the past year courted controversy, with a vocal campaign against antisemitism on college campuses and frequent airings of his views on presidents Biden and Trump. Remarkably, this constant tweeting and ubiquity in media were supposed to be competitive advantages, helping the US vehicle trade at a premium. Perhaps a future lengthy missive will be able to share how he so badly misjudged investor demand for his acumen?
