Getty Images Entertainment/ Stephen Lovekin/StaffBill Ackman’s Pershing Square Capital Management is by far the largest shareholder at JC Penney, giving him a board seat and a lot of influence at the company.
On Friday, Ackman criticised CEO Ron Johnson, a man he personally recruited from Apple and previously loudly supported, which signaled that Johnson’s time was up. He stepped down days later.
Now, according to Reuters, it looks like Ackman’s going to have to take the humiliating step of admitting defeat and exit his years long position in the struggling retailer.
Another investor said that Ron Johnson’s failure does “not bode well for the board’s receptivity to (Ackman’s) future recommendations. He is now a neutered activist.”
And what’s the benefit of having a massive stake in a struggling company if you can’t push changes?
Ackman’s held onto the investment for a long time despite increasing doubts about Johnson’s strategy. But there are a number of reasons that now might be the time for him to exit.
- The losses are getting huge. The declining stock price has led to around $500 million in paper losses for the hedge fund
- The losses and the high profile nature of his bet have significantly tarnished his reputation
- His handpicked leader failed, so he likely has less influence with JCP’s board
- The board picked Mike Ullman, a man Ackman helped push out in favour of Johnson, as interim CEO
The hedge fund could either start selling its shares, or try to join a deal to take the company private. Either way, Ackman will be eager to put this embarrassing chapter in his investment history behind him.