Ackman Says Citi ‘Hidden Assets’ A Boon

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.


In Depth

Fund Manager's Disease: Common Symptoms and Proposed Remedies

May 3 2016 | 6:11pm ET

The cadre of 25 research analysts at Murano Systems speaks with more than 150 investors...

Lifestyle

Point72's Cohen Donates $275M To Veterans Mental Health Network

Apr 6 2016 | 8:31pm ET

Billionaire hedge fund manager Steve Cohen has formed a non-profit aimed at treating...

Guest Contributor

Agecroft: Why NYCERS Should Reconsider Exiting All Hedge Funds

Apr 18 2016 | 5:51pm ET

The recent decision by the New York City Employment Retirement System to exit its...