Activist investor Bill Ackman, who runs Pershing Square Capital Management, is known these days for his massive short on Herbalife — a multi-marketing company that sells weight loss and nutritional supplements. He gave a mammoth presentation last month explaining that he believes Herbalife is a pyramid scheme.
Pershing Square is shorting more than 20 million shares and has a price target of zero.
A number of hedge fund managers don’t agree with his short thesis and have taken the long side, most notably Third Point’s Dan Loeb.
Ackman has definitely been generating a great deal of buzz with his short.
Now let’s take the opportunity to get to know him better.
The 46-year-old activist investor was raised in an affluent Jewish family in Westchester County, New York.
For his honours thesis, he wrote a paper in 1988 called 'Scaling the Ivy Wall: The Jewish and Asian Experience in Harvard Admissions.'
In it, he argued that Michael Chang would never have won the French Open if Harvard hadn't changed their admission policies.
He married his wife Karen in 1994.
Karen was a landscape architect at the Central Park Conservancy in New York, according to their wedding announcement in the New York Times.
The Ackmans have three daughters.
In 1992, Ackman and Harvard classmate David Berkowitz set up Gotham Partners.
The fund quickly grew from $3 million AUM to $300 million.
Investors in Gotham included Seth Klarman and Michael Steinhardt, according to MarketFolly. Whitney Tilson, who is a friend of Ackman's and runs T2 Partners, was also an investor.
The fund closed about a decade later after a bad investment in a golf course that ultimately ended with investors redeeming their capital.
Gothman bought a majority stake in a golf-course operator they renamed Gotham Golf. They amassed a bunch of debt snapping up other golf courses.
Ackman wanted to merge Gotham Golf and a cash-flush real estate company First Union Real Estate Equity & Mortgage Investments to help repay the debts of the golf operator.
In 2002, a judge struck down that merger and investors asked for their money back.
Seeing his first hedge fund close shop clearly didn't deter Ackman from trying again.
In 2004, he started long/short value hedge fund Pershing Square with $54 million assets under management.
Today, Pershing Square has 51 employees and $11 billion AUM.
It's so bad that NYC waiters know to never seat these two next to each other at a restaurant.
Ackman and Icahn feuded back in 2004 over a quick deal they made when Ackman's firm was being investigated by the SEC in 2003. Ackman cold called Icahn and asked him to buy shares of Hallwood Realty, a real estate company trading for about $60, but Ackman said was worth $140. Ichan agreed, but when Halwood merged with another company for $137 a share, Icahn wouldn't give Ackman a cut.
So, as is common on Wall Street, there was a lawsuit. As is less common, Ackman called 'shakedown artist' whose word was 'useless' and also convinced another investor to refuse Icahn's money.
Ackman won ultimately, and Icahn paid him $9 million.
Ackman's short position against bond insurer MBIA took six years to play out and it's chronicled in former Bloomberg News reporter Christine Richard's 'Confidence Game' (Wiley, 2010).
Since 2002, Ackman had been warning against the triple-A rated bond insurer. His old firm Gotham Partners was subsequently investigated in 2003 by Eliot Spitzer and the SEC after MBIA alleged there was a 'conspiracy to drive down its stock price.' Ackman was never charged with any wrongdoing.
His short ended up playing out in 2008 bringing in billions for his fund.
What's more is Spitzer turned to Ackman for advice on how to recapitalize MBIA.
Some of his big plays right now are Canadian Pacific Railway and J.C. Penney.
Ackman engaged in a proxy fight with Canadian Pacific Railway and was able to bring in a new CEO and get new seats on the company's board.
Since Nov. 2011, Canadian Pacific Railway's stock has moved up more than 78%.
Meanwhile, Ackman is the largest JCP shareholder and has taken a bath on the stock so far.
Ackman and his wife are known to host 'singles parties' at their Upper East Side apartment.
They basic premise is to bring in eligible single friends so they can potentially meet someone.
Whenever your hear Ackman speak at conferences he constantly talks about giving his personal profits away to charity.
He and his wife also joined Warren Buffett and Bill Gates in the Giving Pledge committing at least half of their money to charity.
He pledged to give away any personal profits he earns from his Herbalife short to charity.
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