Penney costs Ackman $700 million
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Two years into his JC Penney investment, hedge fund manager Bill Ackman has lost $700 million and abruptly resigned from his seat on the companyâ€™s board of directors. The company’s stock is down 45% in the last year. Todayâ€™s surprise announcement that he would step down from the Penney board comes after he called for the removal of the companyâ€™s interim CEO and chairman, only to be rebuffed by other board members and fellow shareholder George Soros. Ackman is also dealing with a souring short position in Herbalife, whose shares have risen over 100% so far this year.
Losing hundreds of millions of dollars publicly isnâ€™t something you can easily forget, but competitors to Ackmanâ€™s Pershing Square fund seem to be enjoying his slip ups. Dan Loeb used the uber-insider medium of the Bloomberg terminal to presumably needle Ackman (twice). If that werenâ€™t enough for Ackman, Carl Icahn and Soros have been on the opposite end of his bet against Herbalife. Sapna Maheshwari and Mariah Summers write that â€śAckman seems to be coming ungluedâ€ť. Gina Chon thinks it has suddenly â€śbecome cool to trash Ackmanâ€ť because he is losing such vast amounts of money.
Ackman, who intentionally courts media scrutiny, might be abrasive, but he doesnâ€™t lose too often. Justin Fox believes Ackman is doing the marketâ€™s work in pushing beleagueredÂ companies like JC Penney to turn themselves around.
There may still be a path to profitability for Ackmanâ€™s short in Herbalife. William Alden and Andrew Ross Sorkin report new details that could lead to regulatory action. In 2011, fine shards of metal were found in the companyâ€™s shake mix as it was coming of the production line. A week after production resumed, Herbalifeâ€™s SVP for global quality said that if the plant were inspected by the FDA â€śin the next month, theyâ€™re fucked… I donâ€™t know how else to put itâ€ť. Herbalife maintains that no tainted products made it all the way to consumers.
The newly-reported internal documents may explain why Ackman took his so-far losing position in Herbalife: the employee who obtained them first approached the FDA, then Ackman. Ackman is now paying the employeeâ€™s legal bills. Herbalife, however, dropped just 2.5% today. It is still up more than 75% since Ackman announced via a 300-page presentation that it would fall to zero. — Ben Walsh
On to todayâ€™s links: