Tag: ackman

Am I missing something here? After reading the headlines yesterday one would believe Bill Ackman reduced his ownership stake in Target. I don’t see it. Let’s look…

Here is the applicable portion of his SEC filing:

Item 4 of the Schedule 13D is hereby supplemented as follows:
As of May 26, 2009, the date of the last amendment to this Schedule 13D, the Reporting Persons beneficially owned approximately 7.8% of the then outstanding shares of Common Stock, consisting of 3.3% in shares of Common Stock and 4.5% in stock-settled call options. As a result of the transactions reported in this Amendment No. 9, the Reporting Persons sold options and engaged in net purchases of shares of Common Stock, resulting in a net increase of Common Stock ownership of 0.2% and a decrease of beneficial ownership to 4.4%, consisting of 3.5% in shares of Common Stock and 0.9% in stock-settled call options.

Item 5. Interests in Securities of the Issuer.
(a), (b) Based upon the Issuer’s quarterly report on Form 10-Q for the quarterly period ended May 2, 2009, there were 752,279,589 shares of Common Stock outstanding as of June 3, 2009. Based on the foregoing, 32,994,586 shares of Common Stock (which includes Common Stock and physically-settled listed and over-the-counter American-style call options), representing 4.4% of the shares of Common Stock issued and outstanding, are reported on this Amendment No. 9.
As of the date hereof, none of the Reporting Persons owns any shares of the Common Stock other than as reported herein.

So, what seems to be the issue is the type of ownership he had/has.

To help put this into context wee need to look at Target’s (TGT) case against him in this spring’s proxy battle:

Target made apparently a compelling (I say so because he lost the proxy battle, not because I believe it) case that since much of Ackman’s ownership consisted on “call options”, that he truly was not a long term investor.

The options are not “ownership” per se but an interest in the outcome of the stock price. Because of that the interest in those shares cannot be voted and it was this structure that Target harped on to diminish Ackman’s plans as “short term”. The options mentioned above were stock settled. So, he did not sell them for cash but essentially converted them to stock.

Based on this, while the % of shares he holds an interest of some sort in has fallen, his monetary interest probably is not all that unchanged or likely has risen. Look at this example. I buy 2 $40 call options for Target and pay $100 each for them. I have an economic interest in 200 shares (each option =100 shares) but ownership of none. Then, at expiration, I convert 1 of the 2 options into shares. The cost of doing that would be $4000 for the stock based on the price of it. In this case, the “economic interest” I have based on the number of shares in the stock has fallen but my monetary interest has risen, considerably.

So, in Ackman’s case, if he intends on making another run at the board next year, what matters more than anything is not the total economic interest he has through swaps/options/ownership but simply his outright ownership of shares. That structure will eliminate the argument from management and bolster the ideas he has for the company. For this reason, if he eliminated all the option and swap contracts he has and simply owned 3.5% to 4% of the common shares, based on recent results, this would be a more meaningful position in the company in the eyes of shareholders vs the 7.7% he had through the above mentioned agreements.

Because of this the headlines out to have been “Ackman Increases Target Ownership” as Pershing had a “net increase” in shares directly held.

Disclosure (“none” means no position):None

True to his word it appears Ackman is going for the long haul in Target (TGT). My guess is his TIP REIT idea is not dead and rather have a large option position that management used against him in the proxy fight, he is going to own shares.

It is a good idea. Rather than allow them to say he simply wants a quick profit before his options expire and cares nothing about the long term health of the company, he in one fell swoop both takes that argument away from them and also bolsters his own “I own more shares than management and have more a a vested interest” argument.

Looks like we have another battle brewing….

From the filing:

Item 1. Security and Issuer.
This Amendment No. 9 to Schedule 13D (this “Amendment No. 9”) amends and supplements the statement on Schedule 13D originally filed on July 16, 2007 (the “Original Schedule 13D”), as amended by Amendment No. 1 through Amendment No. 8 (the Original Schedule 13D as amended and supplemented by Amendment No. 1 through Amendment No. 8, the “Schedule 13D”), by (i) Pershing Square Capital Management, L.P., a Delaware limited partnership (“Pershing Square”), (ii) PS Management GP, LLC, a Delaware limited liability company, (iii) Pershing Square GP, LLC, a Delaware limited liability company, (iv) Pershing Square Holdings GP, LLC, a Delaware limited liability company, and (v) William A. Ackman, a citizen of the United States of America (collectively, the “Reporting Persons”), relating to the common stock, par value $0.0833 per share (the “Common Stock”), of Target Corporation, a Minnesota corporation (the “Issuer”, the “Company” or “Target”).
As of August 7, 2009, as reflected in this Amendment No. 9, the Reporting Persons are reporting beneficial ownership on an aggregate basis of 32,994,586 shares of Common Stock (approximately 4.4% of the outstanding shares of Common Stock), which include shares of Common Stock and shares subject to certain stock-settled American-style call options.

Item 4. Purpose of Transaction.

Item 4 of the Schedule 13D is hereby supplemented as follows:
As of May 26, 2009, the date of the last amendment to this Schedule 13D, the Reporting Persons beneficially owned approximately 7.8% of the then outstanding shares of Common Stock, consisting of 3.3% in shares of Common Stock and 4.5% in stock-settled call options. As a result of the transactions reported in this Amendment No. 9, the Reporting Persons sold options and engaged in net purchases of shares of Common Stock, resulting in a net increase of Common Stock ownership of 0.2% and a decrease of beneficial ownership to 4.4%, consisting of 3.5% in shares of Common Stock and 0.9% in stock-settled call options.

Item 5. Interests in Securities of the Issuer.
(a), (b) Based upon the Issuer’s quarterly report on Form 10-Q for the quarterly period ended May 2, 2009, there were 752,279,589 shares of Common Stock outstanding as of June 3, 2009. Based on the foregoing, 32,994,586 shares of Common Stock (which includes Common Stock and physically-settled listed and over-the-counter American-style call options), representing 4.4% of the shares of Common Stock issued and outstanding, are reported on this Amendment No. 9.
As of the date hereof, none of the Reporting Persons owns any shares of the Common Stock other than as reported herein.
Item 5(c) of the Schedule 13D is hereby amended and restated as follows:
(c) See the trading data for the last 60 days attached hereto as Exhibit 99.1. Exhibit 99.1 is incorporated by reference into this Item 5(c) as if set out herein in full.
Except as set forth in Exhibit 99.1 attached hereto, within the last 60 days, no other transaction in shares of the Common Stock or derivative securities were effected by any Reporting Person.

Link to trading data

Disclosure (“none” means no position):nONE

Anyone want to take a guess at what the two new investments are?

“Large US based multinationals”…are what Ackman says they bought, one of which has had rapid price appreciation.

Pershing- Square- Q2- Letter –

For more analysis on this you should visit Market Folly

Disclosure (“none” means no position):

Pershing Square’s Q1 Letter to Investors

Disclosure (“none” means no position):

A classic win some/lose some scenario unfolded today at the Target (TGT) meeting for investor Bill Ackman.

Here are some past posts on the subject here, here, and here

Here is soke of the press release from Target:

“On behalf of Target’s Board of Directors and management team, we thank our shareholders for their overwhelming support throughout this process,” said Gregg Steinhafel, Target’s Chairman, President and Chief Executive Officer. “Today’s outcome demonstrates the confidence Target shareholders have in our Board’s qualifications, diversity and experience to provide effective and independent oversight and direction to the company, contributing to the creation of one of the most recognized brands in the United States. We remain dedicated to serving the interests of all shareholders by sustaining Target’s competitive advantage, driving continued profitable growth and generating substantial shareholder value over time.”

Analysis From Bloomberg:

Ackman Said:

As an aside, he does have very valid points as to the voting process involved not just at Target but in corporate America in general. It should not be more dificult to vote for a Board of Directors than the President. It also should be a secret vote and a single ballot so as to not be influenced.

Disclosure (“none” means no position):

As stated here before, I have no “skin in this game”. The sole reason for my interest in this is the message it hopefully sends to other corporate boards should Ackman be successful.

Hopefully there is little objection to the “corporate boards are unresponsive to shareholders” meme. That being said, a successful Ackman may spur changes at other boards if for no other reason the avoid a similar situation.

My main issue is with Target’s changing of their governance rules in order to entrench the board. Also, their refusal to publicly debate or discuss the ideas of their largest shareholder, while at the same time using press releases to snipe at the ideas he floats is more than a bit distasteful..

Read other ValuePlays post on this here, here, and here.

Here is today’s CNBC appearance.

Part 1:

Part 2:

Pershing Square Press Release May 26

Disclosure (“none” means no position):None