Bill Ackman on Receiving End of Hedge Fund Selling

Bill Ackman on Receiving End of Hedge Fund Selling

Laurence Fletcher and Giles Turner

Hedge fund activist Bill Ackman is used to calling the shots at the listed companies he frequently targets.

So there is a certain irony in the fact that it is other hedge funds, he says, who are responsible for driving down the price of shares in his $5.8 billion listed firm, Pershing Square Holdings — a situation he calls a “disappointment.”

Mr. Ackman, known for among other bets a long-running short position on Herbalife, and holdings in stocks such as Allergan Inc.AGN -1.50% and Zoetis Inc.ZTS -0.44%, raised $2.7 billion from new investors via a listing of the investment vehicle on the Euronext Stock Exchange in Amsterdam last year.

However, Pershing Square Holdings PSH.AE +0.25% currently trades at around $24.39 per share. That is some way below its net asset value per share of $26.43 as of Jan. 20. Net asset value per share is a measure of a fund’s assets divided by the number of shares.

The 8% discount, according to Mr. Ackman, is due to selling by event-driven hedge funds who bought in at the float.

He says 27% of capital sold at the flotation went to such hedge funds. Their original aim, he says, was to make a quick profit as the shares moved to a premium – i.e. trading above net asset value.

But wider events took over.

Having priced the fund’s initial public offering on Sept. 30, he points to the collapse in pharmaceutical giant AbbVie IncABBV -1.98%’s deal to buy Shire SHPG -0.70% PLC soon after, which hit the event-driven hedge fund sector hard. Some investors in these funds began asking for their money back.

“(The) Shire (deal) blew up,” he says, adding that “the market went down 6%, and event-driven investments had a horrible year. And so with big redemptions they’ve been selling a lot of things.”

He points to €800 million ($904 million) of selling of Pershing Square Holdings’ shares, “almost all of it coming from hedge funds.”

Perhaps unsurprisingly, Mr. Ackman, who this week joined LCH Investments NV’s list of the greatest hedge fund managers with net gains of $11.6 billion from his fund since inception, is optimistic the discount won’t last. He predicts that the hedge fund sellers will be picked up by long only funds.

“Ultimately I expect it to trade at a premium.”