Wednesday, 20 August 2014
Last updated 1 hour ago
Jun 10 2010 | 11:36am ET
Last month, William Ackman told us that his hedge fund had bought a $600 million stake in Citigroup. Now, he’s explaining why.
In a letter to investors last week, Ackman said that Citi shares are trading “at a meaningful discount to their fair value.” Continuing his paean to the troubled bank, the Pershing Square Capital Management chief cited “two important elements of Citi that the market does not fully appreciate.”
The first is a $21 billion operating deferred tax asset, which could be used to cut the bank’s future tax liabilities on profits. The second is as much as $30 billion in excess capital, which will be returned to shareholders when Citi finishes selling off or shutting down business it no longer wants.
Still, Ackman acknowledged “a much greater degree of uncertainty” with Citi than with some of Pershing Square’s other holdings.
“That said, we believe the current stock price, capital structure and hidden assets provide a margin of safety, in light of the large potential reward from this investment,” he added.
Aug 4 2014 | 7:42am ET
By now, U.S. and international subscribers have received their home or office delivery of the special 500th issue of Futures magazine. You can too!—a very special offer follows. The issue is the largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders. Read more…
The July/August 2014 issue is our largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders.
The Alpha Pages Editor's Note