Sunday, 7 February 2016
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Apr 8 2013 | 10:45am ET
William Ackman offered a candid take on two of Pershing Square Capital Management's biggest investments on Friday, telling an investment conference that he was "surprised" by the opposition to his claim that Herbalife is a pyramid scheme and saying his hand-picked CEO at J.C. Penney has been "very close to a disaster."
Ackman said he did not expect other hedge fund managers, notably longtime adversary Carl Icahn, to attempt to orchestrate a short-squeeze on Herbalife after he announced a $1 billion short against the nutritional supplements company.
"Taking a short position and going public with it is a pretty serious business," Ackman told the Thomson Reuters conference. "Did I think a group of hedge fund managers would take the other side of the trade and try to orchestrate a short squeeze? No, I didn't think that."
In a televised interview with both Ackman and Icahn in January, the latter all but threatened to create a short squeeze. Icahn has taken a large position in Herbalife, as had Third Point's Daniel Loeb, although Loeb has since sold most of his position. Ackman said the public war of words between himself and Icahn was unprecedented.
"This was the first case where there was a lot of sniping going on between managers," he said. But "you have to have thick skin to be in this business."
Despite the rally in Herbalife shares following the announcements of both Loeb's and Icahn's long positions, Pershing Square still has a large paper profit on its short.
Ackman also discussed an investment that has not done as well: J.C. Penney. Ackman installed former Apple executive Ron Johnson at the retailer's helm, considered a coup at the time. But Johnson's moves at the company have done nothing to slow its difficulties and have accelerated them in some ways.
Ackman said the "criticism" of Johnson "is deserved."
"One of the big mistakes was perhaps too much change too quickly without adequate testing on what the impact would be," Ackman said. In particular, Johnson's plan to end sales at the retailer has gone over badly, and while Ackman still supports the CEO, "the impact has been, on a consolidated basis, very close to a disaster."
But Johnson is "working very aggressively with his team to fix the mistakes that have been made, and there have been some big mistakes."
At the same time, "if you get a retailer fixed and you can replicate it, it's about the best way to make money," Ackman said.