Bill Ackman just gave his critics something else to gripe about

Billionaire activist investor Bill Ackman has no shortage of critics and it’s not hard to see why.

When he goes after a new target, Ackman can be vicious, with over-the-top presentations and personal attacks. With his most famous short position — Herbalife — he’s promised investors a smoking gun more than once only to come up short.

A guy like that ought to, then, be wary of giving his enemies ammunition.

But the latest attack on the Pershing Square manager is relatively feeble, and the product of poor disclosure rather than some kind of scheme that its being made out to be.

Here’s the issue. Last week, Pershing Square Holdings, the publicly traded part of Ackman’s hedge fund, made a change to the way it reports its numbers.

Pershing Square used to report returns and net asset values, or the value of an entity’s assets minus its liabilities, every Tuesday. You can see historical reports here.

Last week, however, those numbers came in on Wednesday, September 30, instead of Tuesday, September 29. They showed a 12.6% year-to-date loss. Then, on October 2, Pershing Square Holdings released a statement officially announcing the changes to its NAV reporting policies.

One of those changes, according to the statement, was that the company would only report results once on a week that included the end of the month — rather than on the Tuesday and again the day the month ended.

The reason for that tweak, according to the release, is to prevent investors from using the periodic reporting to front-run, or determine portfolio changes in advance of official disclosures.

The statement also noted that weekly and monthly reporting would now be provided on a one-business-day lag instead of two business days.

Valeant losses

Pershing didn’t give a reason for waiting to make the announcement until after it had made the changes to its reporting.

But the criticism that has emerged is that the change seems awfully convenient: It saved Pershing from reporting a loss on September 29 that was even bigger than the 12.6% loss it did report the next day.

By Australia-based fund manager John Hempton’s calculation, Pershing’s year-to-date return on September 29 would have been closer to -16.6%. Hempton owns shares of Herbalife, the company that Ackman has called a Ponzi scheme and against which the New York-based manager has a massive short position.

Another blogger and prolific Herbalife bull made similar calculations about Pershing’s returns, here.

The dramatic difference over a single day is that Pershing’s stake in drugmaker Valeant plummeted in September, especially on Monday and Tuesday, but rebounded around 12% on Wednesday.

Screen Shot 2015 10 05 at 2.02.44 PMYahoo! FinanceValeant plummeted in September, including on September 28 and 29.

Hempton suggests that Pershing Square made the change to mask the month-end changes to its performance, saying that such a move “opens Bill Ackman up for allegations of deception — allegations that Bill should neutralise immediately by reporting the interim data point as originally planned.”

But in truth, the worst thing that Pershing Square did was fumble the way it explained the changes. It wasn’t until after it had already reported September’s numbers that the fund explained what it was doing.

This is an error for sure — the fund is publicly traded and that means changes ought to be outlined before they are rolled out — but on its own it doesn’t seem like a complaint worth getting worked up about.

There’s other reasons not to read too much into the change: Pershing Square’s portfolio consists of publicly traded companies, so its day-to-day performance can mostly be tracked. This is how we can guess that it recovered a chunk of losses on the last day of the month.

And nobody’s claiming that the numbers Pershing Square did report on September 30 are inaccurate.

Assuming that Ackman deliberately held back the performance report just so it could include Valeant’s September 30 gains also presumes that he knew Valeant was going to rally — which is also not a claim anyone is making.

That, of course, would be a conspiracy worth getting excited about.

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