What’s up with Bill Ackman?

0:00Hey, listeners. Rob Armstrong here. Next week, I'm joining FT colleagues from around the world to answer your questions about the recent turmoil in markets and what happens next. And if you are an FT subscriber, you can submit questions and register for the event at ft.com forward slash markets webinar. That's ft.com forward slash markets webinar. See you there.

0:35Pushkin. James, in 30 seconds, please explain to our listeners, who is Bill Ackman, but use only adjectives? Uh... Rob, you're putting me on the spot.

1:01provocative, aggressive, controversial, and just a bit of a maverick. Yeah. I would have started with Rich myself. Is he? I think so. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I am Rob Armstrong coming to you from Unhedged World headquarters in New York, joined by one of our regular guests, James Fontanella Khan, the FT's U.S. deals guru. Something like that. James, something like that. Today on the show, we're talking about Bill Ackman, a very famous investor who has had some high highs and has recently had what looks like a low low. He had a big plan that, if I understand the news correctly, has fallen apart completely.

1:57At one point early in the summer, he had plans of raising$25 billion for a new investment vehicle, Pershing Square USA, and now he is planning to raise$0. Am I getting this right? That is partially correct. Okay. Rob, we do not want to get sued here, so you've got to be careful. That's why our listeners can't see us, but I've got all these papers to make sure I get the everything correct. The details correct. But no, jokes aside, yeah, he was planning to raise in June about... So he sold a 10 % stake in this vehicle to a bunch of investors. That was the first step to then actually IPO this vehicle.

2:37He sold 10 % at about$10 billion valuation, but the goal was to raise way more. Our colleagues have covered this whole story very deeply. And Antoine Gara had the kind of the scoop that he wanted to get to 25 billion. He has built a huge following on Twitter. Particularly, he was kind of very vocal following the October 7 Hamas attack in Israel. And he was very vocal against a number of university bosses in the U.S. who he felt that were not doing enough to combat anti-Semitism on campus. And then more recently, he endorsed Trump. And so a lot of people saw this a bit as a kind of a MAGA trade.

3:22But this was always a very vocal guy. A big part of his story is that he sort of shouts his trades from rooftops. I remember he had this big short trade on Herbalife. Big time. And he said, this is a patriotic short. And he made a huge deal of it and hyped it up. And that one didn't work well. But at other times, they worked brilliantly. He made some brilliant calls during the great financial crisis. He made some brilliant calls during COVID. Absolutely. Buying hotels. And so part of his magic as an investor is knowing when to kick up a lot of dust and make a big fuss. A hundred percent. But this time sounds a little different.

4:05It has a kind of internet-y character, political character, something going on. Well, I mean, his vision was to kind of create the new version of Berkshire. Like some people called him in the past the mini Buffett. He was trying to become the new Buffett in many ways. Yes. And in his vision, he also wanted to have a big festival for people to kind of talk about investments, ideas. Yes. I hate using this term, but I think he wanted to democratize investment to some extent. And the idea of creating this vehicle was also like so that he could talk even more freely about his investment ideas. You know what this reminds me of?

4:51Roaring Kitty. Right. I said it. I mean, I'm just saying the similarities are this idea of democratizing this idea that the investment world is somehow hidebound, institutionally calcified, and that the little guy and the representatives of the little guy can kind of take a revolutionary posture and open it up and allow the truth to be told. And this was and, you know, there was we've talked about the great movie that was made about Roaring Kitty on this show. This sounds like something that has that flavor, especially because social media plays such a big role. I couldn't agree more with you on that.

5:33And here's also kind of where it brings us back to why he decided not to go ahead. There were a lot of ups and downs since he kind of unveiled the plan to go public. But one of them is like he wanted to combine mainstream finance with decentralized finance. So I'm not sure. Yeah, yeah. What the word? But the kind of the dumb money movie, Twitter, a.k.a. X, MAGA vibes. Totally. Because when he initially wanted to raise$25 billion, then he had to, a few weeks later, he said, actually, we're going to raise something between$2.5 and$4 billion. And then he delayed the IPO partly because he kind of went public when he was not allowed to go public on certain things.

6:20And then again, he slashed it to$2 billion until ultimately he decided to pull the whole thing. Yeah, shelve the whole project. But the whole idea was the retail investors are going to take us to the moon. That was kind of the concept. He had a conviction. And he might still be right. He might find another way. He's talking about coming up with a new structure. This was my question for you, actually. Think about this. Is this simply a case where we had terrible timing? The market has not been very easy. I mean, I guess that's a more recent phenomenon than this. In fairness, he shut it down before the recent kind of - Yeah, the worst.

6:59Yeah. But things have been wobbly. The stock market has been qualitatively different, even if it has remained at high levels. It's been qualitatively different this summer. And we haven't had a lot of IPOs. Yeah. And I was going to say the deal market has not been fantastic. So was Ackman's mistake here simply trying to get this thing off the ground in the summer of 2024? for? I don't think so. He just kind of thought he'd have the support of Wall Street as well as then later on the support of the retail investors. And what happened is I think a lot of people on Wall Street who would have usually backed an IPO of this kind were a little spooked by his, is you want social media persona.

7:46And if you're an institutional investor, you don't want the person you're investing in talking on social media about one political candidate or the other. It's not a question. They just would want you to just focus on what you're doing. This brings us back to the last conversation you and I had on this show, which was about Wall Street's enthusiasm about Kamala Harris, which is it's not so much she has this policy or that policy, but they see her as familiar and predictable. Correct. And that is so much more important than any small nicety of policy, a percent of tax rate here or there. No surprises could be the slogan of institutional money in America in some way.

8:40Absolutely. It's stability, stability, stability. And I think with Ackman, you don't really know what you're going to get next. And again, he has been a brilliant investor. Nobody's taking that away from him. He's made a ton of money. So it's like he can't be an idiot. The numbers are the numbers. Yeah. But people I have spoken to feel like, I don't want all this attention. I just want to invest in something kind of a bit more low key. And that's kind of been a problem. I had an interesting conversation with a very significant investor recently. Listeners would know the name. You would know the name if I said it to you.

9:21And they repeated to me, this person repeated to me something that you hear from a lot of investors. It's not about making money. It's about not losing money. Once you get to a certain size and you're dealing with a client of a certain magnitude, skipping the down years, skipping the drawdowns is so important. Even if you don't have the best returns in the good years. And maybe part of the problem here is that Ackman is an up and down guy. Herbalife, that trade goes into the ditch. The hotel trade during COVID is brilliant and courageous. A lot of institutional money just wants somewhere in the middle.

10:00they don't want to ride the roller coaster with you. A hundred percent. And whereas retail investors might enjoy that. Yeah, exactly. It's fun. It's fun for us. Yeah. It's fun for the press. You know, people like Ackman are a gift to people with our job. And I think it is. It's fun as a retail investor who's not so conservative to like the little Wild West stuff is good. Yeah, you can put allocate five, 10 % of your portfolio to something a bit more jazzy. Yeah, indeed. Indeed. So what do we know about the journey from high aspirations,$25 billion, to closing it? Were there kind of signposts along the way where we discovered things were going wrong?

10:38Or do we sort of not know what happened behind closed doors? No, we have a set. I mean, so we went from June when he sold a stake,$10 billion valuation. We didn't get a better sense that he wants to raise up to$25 billion, which would be massive as an IPO. And then on July 25th, we learned that they're cutting the kind of fundraising target from$25 billion to$2.5 to$4 billion range. Still real money, by the way. Big time. But it's the first sign that there's something not quite working out here. Then he, I remember I was working on a Friday. It's one of those like in the afternoon, you're ready to kind of - Yeah, go drink.

11:26Exactly. And then something flashes on, actually on Twitter. Of course. And it says, IPO postponed. And it's like, what the hell? So we went on the New York Stock Exchange website, and it is just like a single sentence says, IPO postponed. And it's like, okay. We didn't know why it was postponed. and what we were told by a bunch of our sources at the time was that Ackman had, I think a couple of days earlier, spoken about the process of the IPO in a way that was not fully aligned with kind of the rules to list a company. So they had to kind of file a few extra documents. So that's the reason why they had to delay it.

12:11But then a few days later on July 30th, we learned that they've cut further the fundraising amount to$2 billion. So we went from$25 to$4 to$2.5 billion to$2 billion. And then we started hearing that one of the major potential kind of institutional investor, Baupost, was also withdrawing or that it was not going to back the IPO, whereas Ackman had previously said that they were looking into it. and the next day boom gone press release we're withdrawing and this is kind of where i struggle to understand how somebody like ackman he's a smart guy and kind of he says it's all like the press is against me and he does a sense of like he's the victim and it's like dude you said you were going to list at 25 billion you're not so i mean you can call that however you want but something went wrong and there's this like inability to admit that something went wrong.

13:10And he's saying, oh, no, I woke up and I realized there's a better structure to do this. And it's like, okay, we don't really understand fully what went wrong. It occurs to me, I haven't asked you one quite obvious question. What did he say about what he was going to do with the IPO proceeds? Was it going to be just a straight, long, short equity fund? Pretty much, yeah. Yeah, yeah. But he didn't say, I have this big idea or we're going to buy whole companies or anything like it. It's just like, give money to Ackman and let him do Ackman things. Pretty much. And bear in mind, he also, during the SPAC boom, remember that?

13:45Very well. Okay, so listeners have forgotten about it. This is when investors would raise a fund, list it, and then go looking for a potential asset. It turns the normal structure on its head. Usually, you have a company, and then you do an IPO. A SPAC is, we'll have an IPO. We'll figure out the company bit later. Correct. and he had again pretty ambitious ideas of going for a big target but then the spot of the spark sorry the spark market kind of collapsed yes and so he essentially decided to pull the spark and turn it into a spark which was a slightly different yes but similar vehicle so he and he still has that.

14:29It got regulatory approval. So he was also going to probably use that to buy a company that is not currently listed. But the point was, we didn't know what he was going to invest in, but we just wanted to be associated with it. Or if you wanted to invest in his vehicle, that was the objective. And this gets me to my main question for you, which is, this sounds like a project people are going to keep trying. We have social media, which is kind of in full flower and has proven its ability to get people's attention. It's this incredible decentralized avenue for communication. And Ackman's basic idea, which is let's take social media meme stock vibes, personality, and let's turn that energy into a Wall Street thing.

15:27Is this fundamentally a strategy that can work, whether Ackman does it or not? Right. Can we turn social media culture into a financial machine of some flavor? say why not. Like social media has overtaken - Done everything else. Exactly. And I think that he could very rationally use the platform that he has. He has more than one, I think 1.3 million followers on X last time I checked. That's an incredible platform. And I think if he focused on talking about stocks and less about politics and promoting on the platform false conspiracy theories. And I am not scared about saying this in a declarative way.

16:16I think it's actually quite dangerous when he does that. Whereas if he actually spoke about stocks, that's his expertise. And I think he would do pretty well. And I think one thing you've made pretty clear on this show is the institutional money gets spooked and he needs some support from the institutional side of Wall Street. So the magic would be the social media side, the MAGA side, the personality side, tuning that so you can still have institutional money support, kind of getting a best of both worlds. Yeah, and I don't think institutional investors are concerned about social media. I think they understand that social media is another vehicle.

16:59But they're cautious. Yes. They're just more concerned that at some point you start basing your stock picking on your politics rather than on your math. Never a good idea. We'll be right back with Long and Short.

17:30Welcome back. This is Long and Short, the part of the show where we go long things we like and short things we don't like. James, today I'm going to go long hypocrisy. There's been a lot of political coverage, both at our paper and elsewhere. And the main sport of American politics seems to be calling out hypocrisy on the other side. Somebody used to say this, and now they say that. Can you really believe this person? They used to be non-Trumpers. Now they're Trumpers. They used to be California liberals. Now they're trying to pretend to be centrists. I think changing your mind is great, and everybody should do more of it.

18:10And we should waste less time trying to prove that someone else is a hypocrite and spend more time thinking about the future. So yay for hypocrites, says Armstrong. I totally agree with you, by the way. We would be killing each other if we weren't hypocrites. I know. The alternative is terrible. It's called social contract. Indeed. Indeed. James, are you long or short something today? I'm shorting my home country, Italy. It's controversial. Tell me. Well, actually, Italy has had a pretty decent kind of economic period compared to the rest of Europe. Yeah, exactly. It's not a great kind of - Yeah, it's a low bar.

18:53Exactly. But they've been toying around with tax for rich people. And as ever, it's extremely confusing. Essentially, they're trying to attract foreigners to live in Italy by setting up a fairly simple flat tax. For the very rich. Exactly. And now they've changed it. And it's just like, make your mind up and put an end to it. But instead, this constant kind of up and down is just very concerning to me. And it's like, I think this period of economic kind of, I want to call it a boom, but sustained growth might come to an end. On that unpatriotic note from my friend James, the show comes to an end.

19:43We will be back in your feed next week, listeners. And until then, stay sharp. Unhedged is produced by Jake Harper and edited by Brian Erstad. Our executive producer is Jacob Goldstein. We had additional help from Topher Forhez. Cheryl Brumley is the FT's global head of audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn, and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free. A 30-day free trial is available to everyone else. Just go to ft.com slash unhedged offer. I'm Rob Armstrong. Thanks for listening.

20:32We'll be right back.