Betting on Ackman
Bill Ackman has attracted renewed attention in recent months for his outspoken social media presence, but he's also made a fortune for investors and himself, and now others are counting on him to keep doing just that.
Pershing Square Capital Management sold a 10% stake to outside investors for just over $1 billion, giving the hedge fund a high valuation. The question is whether Ackman's newfound social media following will follow him as he expands his empire through new public funds and eventually an IPO.
Pershing Square is currently valued at $10 billion. Investors in the company include Arch Capital Group, BTG Pactual and Iconiq Investment Management L.P. Bloomberg reports that Ackman's associates, including Marc Lasry and Doug Hirsch, also invested.
This brings Ackman's fortune to $8 billion, making him the 333rd richest person in the world, according to Bloomberg calculations.
Investors are betting that Pershing Square will continue to be profitable. Mr. Ackman became famous as an activist investor who shakes up companies to make money, a strategy that has generated big profits but also big losses. He now focuses on a few concentrated investments, including Chipotle Mexican Grill Inc. and Universal Music Group Inc. The approach has worked, delivering a 26% return last year.
Mr. Ackman's firm also has a big advantage over its rivals: Its publicly traded funds, traded in Amsterdam and London, are perpetual capital, meaning investors can cash out only if someone buys out their shares. (Other rivals allow investors to withdraw money daily or quarterly.) That makes assets and management-fee revenue more predictable.
Pershing Square's stock price has also risen as Ackman has become more active on social media. Ackman has also been vocal in his criticism of Harvard's efforts to combat anti-Semitism in the wake of the Hamas-led attack on Israel on Oct. 7. He has also openly criticized diversity efforts and President Biden. (The Financial Times reported last week that Ackman may announce his endorsement of Donald Trump on Elon Musk's X platform.)
Wall Street has speculated that Mr. Ackman's more active social media presence may be an attempt to woo retail investors. If so, the strategy appears to be working: The fund's Amsterdam-traded shares have risen 44% in the past seven months.
Will his followers flock to his future growth plans? Pershing Square plans to launch a closed-end fund in the US this summer that Bloomberg reports could be as large as $25 billion. Like its European fund, it will be open to retail investors. (The firm also reportedly plans to raise $5 billion for a separate fund focused on higher-risk investments, and has received SEC approval for a publicly traded fund that will invest in private companies.)
If these plans go through, Pershing Square would manage at least $45 billion, putting it in the top 10 U.S. hedge funds by assets.
Pershing Square is on track to achieve a long-standing goal early next year. It is understood that DealBook will go public, which could also benefit from Ackman's newfound fanbase — and even more so if the presidential candidate he supports wins.
What's going on?
Indian markets gave up gains as Prime Minister Narendra Modi forecast a smaller-than-expected victory. The country's Nifty 50 index slumped nearly 6% on Tuesday after vote results showed the prime minister was on track to win a third term but his party was likely to lose a significant number of seats in parliament. Investors had been buoyed by exit polls that showed Modi's landslide victory and suggested he could continue with his strategy of economic growth.
New York state is reportedly planning to impose social media restrictions on children. Lawmakers have tentatively agreed to a bill that would ban tech platforms from providing algorithmically-controlled feeds to minors without parental consent, The Wall Street Journal reported, the latest effort to crack down on social media amid concerns about its influence on children, with a similar bill being considered in California.
With Boeing struggling, Airbus is said to be in talks to sell planes to China. Bloomberg reported that the European plane maker is in talks to sell more than 100 A330 jets after Chinese President Xi Jinping met with his French counterpart Macron last month. In contrast, Beijing has halted purchases from Boeing as regulators review its cockpit voice recorders, which have already been approved in Europe and the United States.
Regulators are reportedly targeting major liquor companies over their pricing practices. Politico reports that the FTC is preparing a lawsuit against Southern Glazer's Wine & Spirits, a major wine and liquor distributor, in what would be the Biden administration's latest attempt to go after companies it accuses of unfairly inflating prices.
GameStop continues to thrive
GameStop Corp. has done it again. Shares were volatile, bouncing up and down in premarket trading on Tuesday. This comes after a rally on Monday added $1.7 billion to the struggling retailer's market capitalization and bolstered the fortune of “meme-stock” investor Keith Gill, known as Rolling Kitty.
The big question is whether Gill's ban from the trading platform could thwart the recent rally or whether regulators will step in and investigate the volatility.
Morgan Stanley is reportedly considering expelling Gill from E*Trade.The company acquired the brokerage firm it owns. After GameStop's shares soared last month, the firm investigated Gill's trading history. According to The Wall Street Journal, a social media account linked to Gill posted a post on May 12 that triggered the stock price surge, but the firm discovered that Gill's E*Trade account had made a large purchase of GameStop call options before that.
E*Trade is concerned that such trading could amount to stock price manipulation, The Journal reported. Regulators including the SEC are also investigating GameStop's recent trading volume for anomalies, The Journal noted.
But E*Trade faces tough decisions. Would firing Gill lead to greater customer backlash and exodus?
Gil doesn't seem to mind. A screenshot he posted to his Reddit account on Monday detailed that he held $140 million worth of GameStop stock, plus call options to buy more. Reddit followers cheered him on. “This is a really valuable trade,” one follower wrote, predicting that anyone who bet against the stock would take a big loss.
Short sellers have suffered losses from GameStop, but they show no signs of being deterred. GameStop short sellers fell hard last month, but that didn't stop people like Andrew Left of Citron Research, who was hurt by GameStop's 2021 rally, from opening new short positions.
That's a big gamble. GameStop Corp.'s shares have risen more than 70% over the past month, while other popular day-trading stocks, including bitcoin and tech stocks at the center of the artificial intelligence boom, have remained flat during that time.
Retail investors have once again pounced on the company's shares in the hope that Gill's return after a long absence will help return some of the huge gains seen in 2021.
However, the attention it receives these days is far from what it was in its heyday. At the time, meme stocks like GameStop, AMC Entertainment and BlackBerry saw their valuations soar in just a few days.Ivan Kosovich, managing director at market data firm Breakout Point, told DealBook that retail investors appear to be more cautious this time around.
While Kosovic’s firm has seen a surge in conversations about GameStop, it’s not like it was three years ago, when investors flush with cash from stimulus checks and pandemic savings poured heavily into beaten-down stocks under the slogan “YOLO,” or you only live once.“We haven’t found any compelling evidence that we’re seeing a repeat of the events of 2021,” Kosovic said.
“We're seeing more blue-collar and entry-level white-collar workers. The price of buying a car has suddenly become within reach.”
— Alex Lawrence, a used electric vehicle dealer in Salt Lake City, said of the falling prices of electric vehicles: Making vehicles more affordable They cater to a wider range of consumers. Prices are falling due to increased competition, lower raw material costs, more efficient manufacturing, and federal tax credits.
Top Gates Foundation executive steps down
Just weeks after Melinda French Gates announced her intention to leave the charity she founded with her ex-husband, Bill Gates, one of its longest-tenured leaders is leaving the Gates Foundation: Rob Rosen, who has overseen The Giving Pledge for 10 years, will step down at the end of the month, The Times' Theodore Schleifer confirmed to DealBook.
Rosen was one of the most influential figures in large-scale philanthropy. A former aide to Bill and Hillary Clinton, his role as director of philanthropic partnerships meant that the Gateses were key intermediaries between the couple and major donors, which included persuading other billionaires to sign the Giving Pledge, an idea the Gateses developed with Warren Buffett in 2010, a pledge to give more than half of their wealth to charity over their lifetimes or in their wills.
The Giving Pledge released its latest list of donors last week. That includes OpenAI CEO Sam Altman, and the list currently includes about 250 wealthy individuals and couples who have pledged funds to philanthropy (a pledge that has also been criticized for not holding donors accountable for their commitments).
Rosen hosted an annual gathering of signatories.They discuss each other's philanthropic endeavors. Mr. Rosen announced his impending retirement at the meeting last week, which was also the first that the children of billionaires were allowed to attend.
“I have decided that now is the right time in my career and life to leave the foundation,” Mr. Rosen wrote in a memo to several partners last week and reviewed by The Times. Mr. Rosen, who has been with the foundation for 17 years, said an interim director would be appointed.
Rosen's resignation will add to the turmoil within the foundation. The timing is coincidental, coming shortly after French Gates announced he would be leaving the foundation, leaving $12.5 billion to use for his own philanthropic efforts, making this perhaps one of the most significant changes for the foundation.
Last week, French Gates revealed several organizations he would be supporting, including those promoting women's rights, and offered to donate $20 million each to 12 individuals to donate to charities of their choice.
Speed Read
Bargain Deals
2024 Election
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Donald Trump and the Republican National Committee announced a $141 million fundraising push last month, in part due to the former president's conviction last week. (NYT)
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President Biden is scheduled to sign an executive order on Tuesday to temporarily close the border with Mexico as illegal immigration becomes a growing election issue. (NYT)
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