In a riveting revelation, billionaire Bill Ackman detailed an intense financial battle with Elliott Investment Management that nearly saw the end of his company, Pershing Square Holdings. The high-stakes tussle unfolded in 2017 and was only recently made public by Ackman himself in a three-hour interview on the Lex Fridman Podcast.
Ackman vs Elliott: The Battle Commences
Paul Singer’s Elliott Investment Management privately aimed for a strategic takeover of Pershing Square Holdings in 2017. They took a substantial position in the company, a closed-end vehicle trading at a discount to its asset value. Meanwhile, they shorted the underlying securities in the fund. Ackman revealed this strategy was a gamble that the target company would be forced to liquidate, thereby allowing investors to profit from the turmoil.
“I envisioned an end where the permanent capital vehicle ends up getting liquidated and another activist in my industry puts me out of business,” Ackman confessed. The vision was indeed grim, with the potential to end Ackman’s reign in the investment field.
Ackman’s Ingenious Counterstrategy
Not one to be easily defeated, Ackman devised a brilliant countermove. He began buying up shares in his company, effectively grabbing control. To accomplish this, he borrowed a whopping $300 million from JPMorgan Chase & Co.
“I give JPMorgan enormous credit in seeing through it,” Ackman stated in appreciation. “It’s a handshake bank and they bet I’d succeed.” His audacious countermove paid off, allowing him to hold his ground against Elliott’s aggressive strategy.
The Rise of Activist Campaigns
This intense financial face-off is indicative of a recent trend in the market for closed-end funds. Firms like Boaz Weinstein’s Saba Capital Management have capitalized on historical dislocations in these funds’ pricing. They have been urging asset managers to take proactive steps such as buying back shares or liquidating assets to enhance valuations.
Despite the tumultuous battle, Pershing Square Holdings has continued to thrive. It is listed on European stock exchanges with over $14 billion in total assets and boasted a return of 27% in 2023. However, its net asset value discount, while having narrowed from its 2020 record level, is still lingering around 27%.
Looking forward, Ackman has ambitious plans. He intends to launch a new fund, Pershing Square USA, structured similarly to Pershing Square Holdings, aimed at retail investors. This move is a testament to Ackman’s resilience and his relentless drive to continue innovating in the investment field.
The intriguing tale of Ackman’s struggle and triumph serves as a reminder of the high stakes and intense competition in the world of finance. It is a testament to the resilience and strategic thinking required to survive and thrive amid such challenges. As such, this story offers valuable insights for individuals and businesses navigating the complex and often tumultuous landscape of financial markets.
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