Bill Ackman’s Pershing Square is still having an utterly wretched year.
In a conference call to investors on Wednesday, he disclosed that his private funds are down 14% year to date, while Pershing Square Holdings is down 18% (thank leverage). The funds are up 3-3.5% for the month.
On the call, Ackman addressed a Fortune story that reported that his investors have withdrawn $600 million from his funds for the year, totaling about 5% of Pershing Square’s $12 billion in assets.
That may seem like a lot to the casual Wall Street observer, especially given Ackman’s notoriously stringent investor lock-ups, but he doesn’t see it that way.
“The way we think about redemptions,” Ackman said, “is as a percentage of capital.”
And, if you look at it that way, of the last eight years, 2016 represents the sixth lowest in terms of redemptions – 37% lower than the last eight years, actually.
“My guess is the redemptions we’ve received as a percentage of capital are some of the lowest in the industry,” he said. “We appreciate that support [from investors], and it has allowed us to be very effective and take a long-term view.”
‘The FTC really set them up to fail,’ he said on the call.
Ackman’s winning positions were Mondelez, Howard Hughes, Restaurant Brands, Fannie Mae, and Freddie Mac.
His losing positions were Nomad, Air Products, and Valeant Pharmaceuticals, which is down a whopping 26.5% for the year and makes up 6% of Pershing Square’s portfolio.
Oh, and then there’s Herbalife.
On Friday, the Federal Trade Commission ruled that Herbalife, while not officially an illegal pyramid scheme, would have to pay a $200 million fine and change its business practices going forward.
Ackman spent about 45 minutes of the call explaining that all of that was just semantics. The way he sees it, Herbalife’s punishment is enough to fell the company.
“We believe the implementation of the settlement will cause the pyramid scheme to collapse,” he said.
Herbalife, for its part, does not.
“After two years of working with the FTC, I think we understand the terms of the settlement agreement very well. We would not have settled unless we had the greatest confidence in our ability to thrive and we believe this will be proven out in a little more than a year from now when we release our results after implementation,” Alan Hoffman, executive vice president of global corporate affairs for Herbalife, said in a statement.
Regardless, that means to Ackman that this crusade – which has gone on for three and a half years and drawn Ackman’s archfrenemy Carl Icahn to the other side of the trade – is continuing, at least in Ackman’s mind.
And so he returned to something Wall Street has become all too familiar with since December 2012, when he announced the company would go to zero – a long, detailed presentation of why Herbalife is a pyramid scheme, if not in name, then definitely in practice.
Here’s a key slide:
- Pershing Square
And another one, which explains why Herbalife won’t be able to survive once it complies with the FTC’s settlement:
- Pershing Square
Ackman thinks three key things are worth paying attention to:
He thinks Carl Icahn is going to get off his back and stop buying Herbalife stock: “I don’t think Icahn plans to go up to 35% … I think it’s part of the manipulation,” he said. He believes Herbalife has already violated the terms of its FTC settlement by continuing to distribute marketing materials that claim you can get rich by joining its sales program. “It’s harder to start an Herbalife business than it is to open a McDonald’s,” Ackman said on the call. He thinks settlement compliance costs will be higher than Herbalife has estimated. Plus, no one would want to join their salesforce after the settlement because the company has to change its compensation structure and only compensate when a product has been sold to buyers outside the Herbalife system. He calls those “real customers.”
“Herbalife has already been shut down by the FTC. They just haven’t realized it yet,” he said.
Imagine the delusion.