PSH.L - Pershing Square Holdings

[matts]

I haven't seen anything. But normally something like this would be done with more than one counterparty. Ackman is the paranoid type so it's even more likely he spread the counterparty risk. Any counterparty would be absolutely crazy not to hedge off an exposure like this, so I doubt you will see headlines of a desk losing 2.6bn in a single trade.

[thepupil]

have lots on this up 40% but am buying more to the point where this is now my parents 2nd biggest position (at a wild and crazy 4.5% of their retirement nut!), average cost of about $17 or 44% discount to last NAV.

 

this remains at a 33% discount to most recent NAV of $30 and the market is slightly up since then.

 

if we assume 15% as the "right" discount (one could argue for 0% or 25%), then you've got a little cushion. Hedge the beta if you feel like.

 

Billy's back baby!

 

he's above his high watermark*, his employees are going to get paid when not a lot of funds are doing well, talent retention/attraction is going to be great (permanent capital high fee paying, you don't have to deal with running a short book, what could be a more attractive place to work if you're a ballin analyst)**

 

little token divvy, maximum buyback every day helps offset the management fee.

 

portfolio is a nice mix of stalwarts (Berkshire) and recovery juice (restaurants/hotels/HHC).

 

#teamackman

 

 

*a negative in terms of the fees paid going forward

**well I guess you do have to work for Bill Ackman

[BG2008]

have lots on this up 40% but am buying more to the point where this is now my parents 2nd biggest position (at a wild and crazy 4.5% of their retirement nut!), average cost of about $17 or 44% discount to last NAV.

 

this remains at a 33% discount to most recent NAV of $30 and the market is slightly up since then.

 

if we assume 15% as the "right" discount (one could argue for 0% or 25%), then you've got a little cushion. Hedge the beta if you feel like.

 

Billy's back baby!

 

he's above his high watermark*, his employees are going to get paid when not a lot of funds are doing well, talent retention/attraction is going to be great (permanent capital high fee paying, you don't have to deal with running a short book, what could be a more attractive place to work if you're a ballin analyst)**

 

little token divvy, maximum buyback every day helps offset the management fee.

 

portfolio is a nice mix of stalwarts (Berkshire) and recovery juice (restaurants/hotels/HHC).

 

#teamackman

 

 

*a negative in terms of the fees paid going forward

**well I guess you do have to work for Bill Ackman

 

**haha, I guess you do have to work for Bill Ackman - What a quote

 

Bill Ackman has the potential to be meme'fied

Crying about "Hell is coming"  That maybe a job for my little cousin

[thowed]

Lest we forget...

 

https://www.businessinsider.com/bill-ackman-email-to-charlie-munger-2016-5?r=US&IR=T

 

Still can't decide about this - I take all thePupil's points, but I still don't think it would sit comfortably with me, having him as a manager.

[Gregmal]

Eh, Ackman can be a clown, but the email to Munger is just an example of the guy really giving a shit and doing whatever is possibly in his power to make his investments work; something I think is admirable. The downside, which we've seen with many, probably most notably, Herbalife, is he goes too far and doesnt know when to stop. But Ackman is definitely a guy who works his ass off for his investors and puts everything he has into making things work for them.

[LC]

I'm pretty sure anyone who read that email has read more of that email than CM  ;D ;D ;D

[thepupil]

Last reported NAV was $31.30 as of May 12th.

 

We have some idea of what is portfolio looks like as of 3/31

https://whalewisdom.com/filer/pershing-square-capital-management-l-p#tabholdings_tab_link

 

There are 10 stocks listed on the 13-F and as of April 30th PSH owned 10 stocks and had no shorts.

https://pershingsquareholdings.com/wp-content/uploads/2020/05/Performance-Report-April-2020-PSH.pdf

 

The sector descriptions in April also match with the stocks.

 

Excepting HHC, the bulk of PSH's portfolio is up since the last reported NAV, most notably CMG is up 13%, and the rest of the core is up 0-5%.

 

One of my least favorite parts of PSH is the Fannie Freddie trade, not because I agree or disagree with it but rather because it tempts me to read that goddamn thread.

 

The fannie's are also bouncing a little.

 

All this to say that I think NAV is continuing to go up and the discount remains 30%+. I have zero opinion on Fannie/Freddie, but if Billy outperforms in 2019, then executes the great and glorious hedge of March 2020, then monetizes it at the right time, then Fannie Freddie works, what is that going to look like in terms of his brand?

 

In other news, the restaurant stocks look stupid expensive. I don't understand CMG/SBUX/QSR at these levels, and they are a large portion of the book. there's an arb in there somewhere, (long PSH ADR in IRA / risk reversals on the restaurants stocks in the taxable?) but I'm just holding the fund and wearing the beta for now.

 

Owning the ~13% of the 13-F in Berkshire at a 30% discount is extremely appealing, which is more than offset by the 38% in QSR, CMG, and SBUX. in total, one must be more bearish of NAV growth now than a couple months ago.

 

#inBillwetrust

#teamAckman

 

 

 

 

 

 

 

[Gregmal]

That short the market, call the bottom, and load the boat trade in March may go down as one of the greatest trades ever. Ackman is an ass, but I enjoy rooting for him. One of the few guys out there who seems to learn from his mistakes.

[aryadhana]

The discount would probably vanish if the Board announced that the IMA with PSC would be terminated and money returned to shareholders after Ackman is gone... The holdco has a key man clause that expires in 2021, before which if Ackman left any renewal of the IMA would require majority consent from public shareholders.  After 2021 it sounds like it's pretty much up to the Board.  At this point it should be pretty clear that the level of the discount has less to do with expectations of Ackman's performance as much as the fact that there's no indication that shareholders will ever get their money back (except by selling to other bagholders shareholders at a discount) and the holding company is controlled by people with no economic interest in the matter. 

 

There really is no justification for failing to buy back as much of the company as public shareholders would sell for less than 85-90% of face value through a series of large tenders.  If the holding company committed to buying back as much stock as was available at more than a 10-15% discount every year -- heck, even every decade -- the stock would pretty quickly trade up to 92-98% of NAV and the company would end up needing to buyback little.  I wish we could award Ann Farlowe (or whoever is actually in charge of this thing) a 1-year warrant to buy 5% of the company at a 10% discount to NAV with option for a cash-free exercise.  Should be sufficiently motivating for someone whose guiding interest otherwise is maximizing the longevity of director income.

 

My guess is that the discount gradually trades back to 25%.  It's high right now because the company releases Tuesday's NAV after Wednesday's close and the volatility that makes this delay expensive should eventually relent. 

 

[buffetteer1984]

Pershing is likely hoping for re-rating based on performance value instead of having to spend the liquidity on buybacks and having it available for any potential market weakness to deploy into existing investments.  They've already bought back plenty and the markets still refuse to give them credit.  Pershing is batting above 800. avg over their life since 2004 on investments so i'm surprised the markets are still discounting their mistakes in valeant and herbalife (though the thesis was correct) to this extent.

[aryadhana]

Pershing is likely hoping for re-rating based on performance value instead of having to spend the liquidity on buybacks and having it available for any potential market weakness to deploy into existing investments.  They've already bought back plenty and the markets still refuse to give them credit.  Pershing is batting above 800. avg over their life since 2004 on investments so i'm surprised the markets are still discounting their mistakes in valeant and herbalife (though the thesis was correct) to this extent.

 

It's not discounted because people expect Ackman to perform poorly (or at least not predominantly so); was also trading at a discount through the first half of last year when Ackman did well.  The discount is there because there is no prospect yet of the company ever returning money to shareholders despite the fact that failing to do so is destroying a lot of value.  Rarely is it so mathematically obvious that a company both can and ought to return money (either through dividends or buybacks so long as it is understood these will continue at an unusual pace until such time price approaches book value -- the discount would close under either strategy; the latter would just be relatively more accretive to continuing investors).  And the people who can influence the course of this discussion have absolutely no interest in the outcome.  It's also self-perpetuating at this point.  Hard to have faith in directors that refuse to buy a $1 for 66¢.  At some point there really is a floor, but I don't know what that is. 

 

[iceinvan]

Two potential justifications for Pershing not buying back more stock:

 

1) Buybacks increase leverage (assets down, equity down, debt unchanged). NAV per share will go up, but the higher leverage may actually end up widening the discount.

 

2) Investing a dollar to create two dollars increases NAV per share more than using that same dollar to buyback stock at a 30% discount. And it is reduces leverage.

 

 

[Drokos]

I don't see why there is any buyback criticism. They have repurchased ~20% of the shares outstanding over the last three years.

 

If they wanted to close the gap they could obviously do a $100-500MM tender at 10-15% discount to NAV, but they certainly couldn't get it filled at the current 35% discount. I'd much prefer they continue slowly repurchasing everyday and keep accumulating at a 35% discount rather than trying to rush it and pay higher prices to get it done quick. I couldn't be happier with their capital allocation as a long-term shareholder.

[mcliu]

Keep in mind, there's 1.5% fees and 16% (?) carry. It's not like BRK where you have permanent capital ran for essentially free.

Unless you're expecting a liquidation or exceptional out-performance, it probably won't trade at FMV holding a basket of liquid publicly-traded securities.

[aryadhana]

Two potential justifications for Pershing not buying back more stock:

 

1) Buybacks increase leverage (assets down, equity down, debt unchanged). NAV per share will go up, but the higher leverage may actually end up widening the discount.

 

2) Investing a dollar to create two dollars increases NAV per share more than using that same dollar to buyback stock at a 30% discount. And it is reduces leverage.

 

They can sell their 10% of their invested portfolio to buy back 15% of the same in the form of public shares, so the argument holds even keeping leverage constant.  There is no "investing a dollar to create two dollars" here.  What they own in SBUX may be undervalued, but even if it is the same thing at a big discount is even cheaper still.  They should indeed probably prepay (or set aside in relatively safe fixed income reserves to pay back) outstanding debt as they buyback shares.  Last year's debt issuance was a bad idea as well. 

 

They could just end the fund and unlock billions in captive shareholder value.  Given that the value is measured mark-to-market the threshold for not doing so has to be enormous, but then the company isn't controlled by interested parties. 

[aryadhana]

Keep in mind, there's 1.5% fees and 16% (?) carry. It's not like BRK where you have permanent capital ran for essentially free.

Unless you're expecting a liquidation or exceptional out-performance, it probably won't trade at FMV holding a basket of liquid publicly-traded securities.

That doesn't explain the extent of the discount (what's the FMV of 16% of the company's position in call options struck at-the-money?). 

 

I don't see why there is any buyback criticism. They have repurchased ~20% of the shares outstanding over the last three years.

 

If they wanted to close the gap they could obviously do a $100-500MM tender at 10-15% discount to NAV, but they certainly couldn't get it filled at the current 35% discount. I'd much prefer they continue slowly repurchasing everyday and keep accumulating at a 35% discount rather than trying to rush it and pay higher prices to get it done quick. I couldn't be happier with their capital allocation as a long-term shareholder.

 

Pace of repurchases hasn't been enough, or at least the logic isn't properly communicated.  If they had a standing offer to repurchase up to a 25% discount -- narrowing to a 10% discount a decade from now -- shares would probably trade up a lot even if there wasn't much use of the repurchase mandate.  The strategy you outline is fine in the same sense that "I hope management blunders in a methodical way so that it can buyout confused investors for a discount" is a good idea.  If people had faith in the current strategy, shares wouldn't be trading for such an enormous discount to what the extremely liquid underlying is worth. 

[thepupil]

good time to trim in my view.

 

NAV growth rather than re-rating has driven returns of 20-78% from purchase prices and I'd argue the NAV is getting riskier with increased concentration in QSR and the abandonment of Berkshire and a substantial move in Fannie / Freddie and the market up a lot in general. (though at the very lows this was available for like 60% of NAV so there's been some accretion from a very low base)

 

have trimmed 1/4 of  maximum # of shares; if you trust Ackman fully, the thesis is absolutely intact and NAV multiple is still in the 70% range.

[buffetteer1984]

Might get listing on the ftse100 so could be a catalyst to closing the discount to nav

[Cevian]

Keep in mind, there's 1.5% fees and 16% (?) carry. It's not like BRK where you have permanent capital ran for essentially free.

Unless you're expecting a liquidation or exceptional out-performance, it probably won't trade at FMV holding a basket of liquid publicly-traded securities.

 

Yup, all the Buffett wannabes pretend to emulate everything except Buffett's 100k salary. I'm done with the "finding the next Warren Buffett" industry. I admit I got burned by "Big Liar" and it's not happening again. As in every sport, there is always one "great one" and in this industry there will never be another Buffett. Lots of pretenders though, but never on fees.

[fareastwarriors]

 

Bill Ackman’s new blank check company may be a $4 billion bet on a so-called Mature Unicorn

 

https://www.cnbc.com/2020/06/22/bill-ackmans-new-blank-check-company-will-be-a-4-billion-bet-on-a-so-called-mature-unicorn.html

[aryadhana]

Size of PSH's commitment to the SPAC, including whatever he needs to reserve for possible exercise of the warrants, decreases the likelihood of a large buyback.  Altogether, the YTD outperformance probably also dampens any pressure to close the discount by returning money to investors.  Which is a disappointment -- investors would have been better off had he closed the fund in January even considering his excellent performance thereafter.  Put another way, shares are trading today what they were worth last March and he's performed exceptionally since then... except against the benchmark of doing nothing and returning money.

 

Astonishing disregard.  And what's worse is that I'm pretty sure he has no direct fiduciary duty to PSH shareholders, which is rather endowed to a Board controlled by a charity without any economic interest in much other than the longevity of the annual retainer.  (He presumably does have a duty to the PSH funds he manages, which admittedly have done quite well)

[thepupil]

The dude has been buying back a nice amount, over $700mm in 3 years or so. Buys the most every day.

 

Why would we expect someone to completely liquidate their life’s work? Full liquidation is completely unrealistic particularly in the context of his recent performance; there’s strong argument the vehicle should exist.

 

You can either look at the fat discount as an opportunity or as evidence they aren’t doing enough. I choose the former.

 

 

 

 

Pershing Square Holdings, Ltd. Announces Additional Share Buyback Program of $100,000,000

 

PSH has Repurchased a Total of $762 Million of PSH Public Shares Since the Launch of its First Share Repurchase Program on 2 May 2017

 

Business Wire

 

LONDON -- June 23, 2020

 

Regulatory News:

 

Pershing Square Holdings, Ltd. (LN:PSH) (LN:PSHD) (NA:PSH) today announced an additional share buyback program (the “Program”) for $100,000,000 of PSH’s outstanding Public Shares on the London Stock Exchange and Euronext Amsterdam. The Program will commence following the completion of the previously announced $100,000,000 share buyback program. The Program is accretive to NAV per share and will reduce PSH’s capital.

 

As of 22 June 2020, PSH had completed 84.5% of the previously announced $100,000,000 share buyback program. PSH commenced that program on 16 April 2020 and has repurchased a total of 3,853,545 PSH Public Shares at an average price of $21.94.

 

Since PSH commenced its first share buyback program on 2 May 2017, PSH has repurchased a total of $762 million of PSH Public Shares, representing 47,816,431 PSH Public Shares at an average price of $15.93.

 

Jefferies International Limited will continue in its role as sole buyback agent for the Program which will enable the purchase of shares during closed periods. Shares repurchased by the Company will be held in Treasury.

 

In accordance with EU regulations, PSH advises shareholders that the number of shares to be repurchased under the Program is the maximum of $100,000,000 or 6,000,000 PSH Public Shares.

 

About Pershing Square Holdings, Ltd.

Pershing Square Holdings, Ltd. (LN:PSH) (LN:PSHD) (NA:PSH) is an investment holding company structured as a closed-ended fund that makes concentrated investments principally in North American companies.

[aryadhana]

I think a lot of what you're saying would be fine if the holding company was structured in a way that let shareholders have any say.  Giving shareholders a way to realize the value of assets they own wouldn't necessarily nullify his life's work -- he could reorganize into a normal hedge fund, which is more than capable of owning shares in Chipotle.  He could also simply explain the circumstances under which capital would be returned.  As I said, if he promised to buy back a $1 today, $2 tomorrow, and double that every day forward until the discount was less than 10-15%, it would likely close without the fund actually having to buyback all that much at all. 

 

He finds himself in the position that shares would rally by almost 50% if he were to unexpectedly retire...  It's an opportunity when a conglomerate or operating company temporarily trades at a 30% discount.  Not so much for an investment company holding extremely liquid securities marked-to-market.  What is the likelihood he outperforms a liquidation that results in a 45-50% gains realized immediately reinvested in the market?

 

I probably sound more bitter than I am.  I think it's an objectively regrettable situation for a number of reasons (as I said, none of this would offend me if investors had any control), but I also realize the merits and broadly like the guy.  If anything my problem is not with him, but the Board...  he has held up his share of the bargain (if you one-off 2016) and NAV has done well. 

[aryadhana]

I sort of think he might prefer shares continue to trade at a discount so he can continue accretive repurchases indefinitely which may be in the interest of long-term shareholders.  I think that altogether isn't very nice, but not wholly inconsistent with the premise of: "trust me - I'm going to invest your money indefinitely and give it back to you when I'm done.  You're on your own if you want to sell before that."  (The IMA is such that a key man event, like his retirement, would cause the fund to terminate until 2021 - but I'm not sure what happens once that clause expires.  I think shares would react positively to an announcement that investors will have the opportunity to tender shares for book value once he retires). 

[Xerxes]

What is the logic for the new investment vehicle ?

 

why not issues share of Pershing Square to get more 'permanent capital' to do whatever he wants to do or sale an asset.

I understanding that it has been buying back shares, so issuing share would just reverse that, but still is there a more specific reason to create a mini-Softbank vision fund