William Ackman’s Pershing Square Capital Management building stake in United Technologies

William Ackman has let it be known that Pershing Square has reversed its position vis-a-vis Herbalife and is now building up a position in aircraft parts maker United Technologies Corp.

Despite the fact that 6 years ago William Ackman, billionaire investor who is the founder and CEO of Pershing Square Capital Management, wagered $1 billion that Herbalife’s stock price fall to fall to zero and publicly called the nutrition company a fraud in a 3-hour presentation before the media, investors and analysts, he has now let it be known that Pershing Square Capital Management was no longer betting against Herbalife.

Ever since Ackman begain shorting Herbalife’s stock, the price of the shares have instead appreciated – from $45 in 2012 to $95.88 on Wednesday.

Pershing Square’s total loss is unknown.

Ackman is now building up a position in United Technologies Corp, an aircraft parts maker, whose shares have risen by 3.4% to $138.49.

A source familiar with the situation has confirmed Pershing Square’s exit from Herbalife and its new position in United Technologies.

Pershing Square has yet to disclose when it began building up its position in United Technologies.

Pershing Square’s Herbalife fiasco

Since years Ackman had claimed Herbalife was running an illegal pyramid scheme in which distributors of its diet shakes and other products earned more money from bringing recruits into the network than from selling its products.

Significantly, in 2017, Ackman converted Pershing Square’s short position into a bet against the company through put options which helped limit Pershing Square’s potential losses. Now even this position has been closed. Ackman said he would not be speaking about this matter publicly anymore.

Incidentally, after Ackman publicly rubbished Herbalife, billionaire investor Carl Icahn publicly revealed his stock holdings in the company which saw him become Herbalife’s biggest shareholder.

Ackman’s Herbalife bet has dented Pershing Square’s long-term performance and turned him into a social activist as he stepped up a crusade against the company.

With the U.S. Federal Trade Commission probing the matter, it eventually reached a settlement with Herbalife paying $200 million in penalties and required that it undertake some reforms regarding its business practices.

Investors in Pershing Square’s were quick to applaud the decision and chose cast aside Ackman’s campaign against Herbalife’s saying “it is part of the manager’s strategy to rebuild his performance record after three years of losses”.

In January 2018, Ackman told investors that he would focus more on investments and let his partners do the marketing.

With Ackman now focusing on United Technologies, Greg Hayes, the company’s CEO told investors last week that it was exploring the possibility of the company’s business portfolios, which includes, air conditioners, jet engines and elevators, having their own separate legal entities.

Incidentally, Herbalife managed to beat Ackman’s short bet strategy by aggressively buying back its shares; according to analysts, this strategy worked since it made short selling positions extremely dangerous.


Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Strategy

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