Friday, November 02, 2018

Pershing Square Net Asset Value and price

Very rough notes on Pershing Square.

Pershing Square is a fund run by Bill Ackman, that was listed on the Dutch AEX and now also on the London FTSE.

The fund owns shares in other companies and charges a fee of 20% of performance. In theory, you would be better off owning the shares of the companies directly and getting 100% of performance (if you were as good (or better) at timing buys than Bill Ackman.

On the other hand, you can buy ownership of the underlying companies with a discount. You pay $14,86 today per share of Pershing and the sum of the parts Net Asset Value per share is $19 which you would have to pay to get the same number of underlying shares in companies if you bought them directly. The upside is 28% roughly the same as it has been for a few years.

For a Pershing shareholder, it is nice when Pershing buys its own shares. If it could keep buying in shares at $14,86 and bought all shares and you had the very last share, it would be worth roughly a billion dollars. That would make you as the very last Pershing Shareholder very happy so you might think Bill Ackman would do this.

On the other hand, Ackman's incentive is the 20% performance fee. The more assets under management there are the higher the fee. If Pershing buys its own shares, that is great on a per share basis, but not good for Ackman because it decreases assets under management and the amount of fees he gets.

In the long-run, I believe it is better to own the stocks directly. The question is at what percent of a discount to NAV does the argument change??

2017

Pershing Square and Rule Nr. 1 Don't lose money.







Pershing Square manager Bill Ackman read a book called "The Outsiders" and then bought lots of Valeant stock...


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