Betting on Ackman
Bill Ackman has gained new prominence in recent months for his outspoken presence on social media. But he has also made riches for his investors and himself — and now others are hoping he’ll continue to do so.
His Pershing Square Capital Management has sold a 10 percent stake for just over $1 billion to an array of outside investors, giving the hedge fund a lofty valuation. The question is whether Ackman’s newfound fans on social media will follow him as he grows his empire, including through a new listed fund and, eventually, an I.P.O.
Pershing Square is now valued at $10 billion. Among those that bought into the firm are Arch Capital Group, BTG Pactual and Iconiq Investment Management; Bloomberg reports that Ackman peers including Marc Lasry and Doug Hirsch also bought in.
That has bolstered Ackman’s paper worth to $8 billion, Bloomberg calculates, making him 333rd among the world’s wealthiest people.
Investors are betting on Pershing Square continuing to mint money. Ackman rose to fame as an activist investor who profited by shaking up companies, a strategy that made lots of money — but also lost a lot. He now focuses more on a few concentrated bets, including on Chipotle Mexican Grill and Universal Music Group. That approach has paid off, with a 26 percent return last year.
Ackman’s firm also has a big advantage over rivals: Its publicly listed fund, which trades in Amsterdam and London, has permanent capital, where those who buy in can cash out only if someone buys their stake. (Other rivals let investors pull their money on a daily or quarterly basis.) That allows for more predictable assets and management fee revenue.
Pershing Square’s stock has also risen as Ackman has grown more outspoken on social media, especially after he criticized Harvard’s efforts to combat antisemitism following the Oct. 7 Hamas-led attacks on Israel. He has also publicly criticized diversity initiatives and President Biden. (The Financial Times reported last week that Ackman may soon endorse Donald Trump with an announcement on Elon Musk’s X platform.)
Wall Street has speculated that Ackman’s more outspoken social media presence is aimed at courting retail investors. If so, the strategy appears to be working: Amsterdam-traded shares in the fund are up 44 percent over the past seven months.
Will his followers flock to his future growth initiatives? Pershing Square is expected to open a closed-end fund in the U.S. this summer — which Bloomberg reports could reach $25 billion. Like the European fund, it would be open to retail investors. (It reportedly also plans to raise $5 billion for another fund focused on high-risk bets, and has S.E.C. approval for a publicly traded vehicle to buy into private companies.)
If those plans come to fruition, Pershing Square would manage at least $45 billion, catapulting it into the top 10 biggest U.S. hedge funds by assets.
As soon as next year, Pershing Square intends to fulfill a long-held goal: taking itself public, DealBook understands. That, too, could benefit from Ackman’s newfound fans — and perhaps more so if his preferred presidential candidate wins as well.
HERE’S WHAT’S HAPPENING
Indian markets surrender gains as Narendra Modi eyes a smaller-than-expected victory. The country’s Nifty 50 index was down nearly 6 percent on Tuesday after early vote counts indicated that the prime minister would win a third term, but that his party would most likely lose a significant number of seats in Parliament. Investors had been buoyed by exit polls that suggested an overwhelming Modi win, allowing him to continue his economic growth strategies.
New York State reportedly plans to impose social media restrictions for children. Lawmakers have tentatively agreed on legislation that would bar tech platforms from serving algorithmically managed feeds to minors without parental consent, according to The Wall Street Journal. It is the latest effort to clamp down on social media amid concerns about its effect on children; similar legislation is being considered in California.
Airbus is said to be in talks to sell planes to China amid Boeing’s troubles. The European aircraft maker is negotiating the sale of more than 100 A330 jets after President Xi Jinping of China met Emmanuel Macron, his French counterpart, last month, Bloomberg reports. By contrast, Beijing has halted purchases from Boeing, as regulators review a cockpit voice recorder that has already been approved in Europe and the U.S.
Regulators reportedly target an alcohol giant over its pricing practices. The F.T.C. is preparing a lawsuit against Southern Glazer’s Wine & Spirits, a major wine and liquor distributor, Politico reports. The case would represent the latest attempt by the Biden administration to take on companies that it accuses of unfairly jacking up prices.
GameStop continues to go, go, go
GameStop is at it again. Shares have been volatile in premarket trading on Tuesday, bouncing between gains and losses. That comes after Monday’s rally added $1.7 billion to the struggling retailer’s market value, padding the paper fortune of Keith Gill, the “meme stock” investor known as Roaring Kitty.
The big question is whether the latest rally could be derailed by Gill getting booted from his trading platform, or if regulators will step in to investigate the wild gyrations.
Morgan Stanley is reportedly considering kicking Gill off E*Trade, the brokerage it owns. After a mega rally in GameStop last month, the company looked at Gill’s trading history. It noticed that his E*Trade account had purchased a large block of GameStop call options ahead of a May 12 post from a social media account associated with Gill that helped set off a surge in the shares, according to The Wall Street Journal.
E*Trade is concerned that such trading could amount to stock manipulation, The Journal reports. Regulators, including the S.E.C., are also reviewing the recent trading volume around GameStop for anomalies, The Journal notes.
But E*Trade faces a difficult decision: If it drops Gill, would that prompt a larger customer backlash, or an exodus?
Gill seems unconcerned. A post to his Reddit account on Monday showed a screenshot detailing that he owns $140 million worth of GameStop shares and call options to buy more. His followers on Reddit cheered him on. “This is a deep value play,” wrote one, predicting that those who have bet against the stock will see hefty losses.
Shorts have been burned by GameStop, but they appear undeterred. GameStop short sellers were down big last month, but that hasn’t stopped the likes of Andrew Left of Citron Research, who got squeezed in the 2021 GameStop rally, from opening a new short position.
That’s a big bet. GameStop is up more than 70 percent in the past month, a period in which other day-trader darlings, including Bitcoin and the tech stocks at the heart of the artificial intelligence boom, have flatlined.
Retail investors have jumped back into the company’s shares on hopes that Gill’s return after an extended silence will rekindle some of the huge gains they saw in 2021.
But the recent attention is a far cry from that heyday. Back then, GameStop and other meme stocks, such as AMC Entertainment and BlackBerry, saw huge jumps in valuation in a matter of days. Retail investors appear to be more cautious this time, Ivan Cosovic, the managing director of Breakout Point, a market data company, told DealBook.
His company has seen big spikes in chatter about GameStop, but nothing like what was witnessed three years ago when investors, flush with stimulus checks and pandemic savings, took big swings on beaten-down stocks under the “YOLO” — you only live once — rallying cry. “We find no compelling evidence that we are reliving the events of 2021,” Cosovic said.
“We are seeing more blue-collar and entry-level white-collar people. The purchase price of the car has suddenly become in reach.”
— Alex Lawrence, a dealer in Salt Lake City who specializes in used electric cars, on falling prices that are making vehicles more affordable for a wider group of consumers. Increased competition, lower raw material costs, more efficient manufacturing and federal tax credits are all credited with pushing down prices.
A top Gates Foundation official exits
Just weeks after Melinda French Gates signaled that she would leave the charitable behemoth she started with her former husband, Bill Gates, one of the longest-serving leaders is exiting the Gates Foundation. Rob Rosen, who has overseen the Giving Pledge for a decade, will depart at the end of the month, The Times’s Theodore Schleifer reveals for DealBook.
Rosen was one of the most influential people in big-money philanthropy. A former aide to Bill and Hillary Clinton, his role as director of philanthropic partnerships meant he was a key middleman for the Gateses with big donors. That included trying to persuade other billionaires to sign the Giving Pledge, a commitment to donate over half of their money to charity over their lifetimes or in their wills, an idea the Gateses created in 2010 with Warren Buffett.
The Giving Pledge announced its latest set of donors last week. They included Sam Altman, the C.E.O. of OpenAI, and the list now includes almost 250 wealthy individuals or couples who promise to fund philanthropic causes. (The pledge has also been criticized for failing to hold donors accountable to that commitment.)
Rosen ran the annual gathering of signers, where they discuss one another’s philanthropic work. Rosen broke the news of his impending exit last week at the most recent meeting. The gathering was also the first to allow the children of these billionaires to attend.
“I’ve decided now is a good time in my career and life to move on from the foundation,” Rosen wrote in a note to some partners last week that has been seen by The Times. Rosen, a 17-year veteran of the foundation, said an interim director would be named.
Rosen’s departure adds to the upheaval at the foundation. The timing is coincidental, but it comes soon after French Gates said that she would leave — perhaps one of the most significant changes to the foundation — with $12.5 billion to spend on her own philanthropic work.
Last week, French Gates revealed some of the groups she would start backing, including organizations to advance the rights of women, and offered to donate $20 million each to 12 individuals to give to charities of their choice.
THE SPEED READ
Deals
Illumina’s board agreed to spin off Grail, the gene-sequencing machine maker it reacquired in 2021 only to face regulator and investor scrutiny. (Reuters)
“Peter Orszag wants to reimagine Lazard. Will his bankers let him?” (FT)
Election 2024
Donald Trump and the Republican National Committee announced a $141 million fund-raising haul last month, fueled in part by the former president’s criminal conviction last week. (NYT)
President Biden on Tuesday is expected to sign an executive order to temporarily seal the border with Mexico as illegal immigration grows as a hot campaign issue. (NYT)
Best of the rest
The inside story of French soccer star Kylian Mbappé’s transfer to Real Madrid. (The Athletic)
“Companies Are Getting Smarter About Raising Their Prices” (Bloomberg Odd Lots podcast)
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