Ackman Vows to End Three Years of Pershing Underperformance

(Bloomberg) -- Billionaire investor Bill Ackman pledged to end three years of underperformance at Pershing Square Holdings Ltd., calling recent returns “particularly unsatisfactory” at a time when markets globally have been buoyant.

Pershing Square Holdings’s management company has been restructuring into a smaller, investment-centric organization whose future asset growth will be driven by results, Ackman wrote in a letter to investors. Shareholders of the U.K.-listed company will vote April 24 on a planned $300 million tender offer, which could help to reduce the discount to net asset value the company trades at, it said in a separate statement.

“While the overall record is satisfactory for early investors, it has been disappointing for PSH investors who invested in recent years,” Ackman said in the letter, included in the company’s annual report released Monday. “2017 should have been a stronger year for Pershing Square.”

Pershing Square Holdings had a net loss of 4 percent last year compared to 22 percent gains on the broader S&P 500 during the same period. The biggest hits to the portfolio came from its investments in Herbalife Ltd. and Mondelez International Inc.

Ackman said Pershing had taken steps to limit its risk exposure by getting preliminary approval to settle ongoing litigation related to drugmaker Allergan Plc, which it expects to be finalized later this year. It has also exited its short position in Herbalife, and reinforced its focus on its core investment principles, he said.

The investor also confirmed he had sold out of his passive investment in Nike Inc. after the share price appreciated by more than 30 percent. Ackman made about $100 million on the investment in just a few months, a person familiar with the matter said last week.

Pershing Square’s portfolio trades at a 23 percent discount to its net asset value, with catalysts that should contribute to value recognition, according to Ackman. The investment firm’s ability to generate ideas is “intact and productive,” he said in the letter.

Last year was a tough one for Ackman as his investment in Chipotle Mexican Grill Inc. continued to suffer setbacks. He also lost a high-profile proxy fight at Automatic Data Processing Inc., although this month he took advantage of a jump in ADP’s share price to sell shares worth about $125 million at a profit.

The bumps have continued into 2018 after he finally admitted defeat in his epic battle with Carl Icahn over his $1 billion short position in Herbalife.

In the letter, Ackman didn’t concede that Pershing Square made a bad call on the short, only that the nutritional-supplements company’s structure had changed to the point where it was too risky to continue.

“While we continue to believe our analysis of Herbalife’s business remains correct, the shares have become a highly risky short sale in light of the extremely limited free float," Ackman wrote.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net.

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Ben Scent, Timothy Sifert

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