Fannie Mae (FNMA)

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MONSTER NEWS OUT! Ackman Bet on Freddie Mac, Fannie Mae Sours After Dutch IPO


By Ruth David Oct 1, 2014 4:16 PM ET

Oct. 1 (Bloomberg) -- Pershing Square, one of the funds managed by activist investor Bill Ackman, has raised $2.7 billion in an initial public offering in Amsterdam. Stephanie Ruhle reports on “In The Loop.” (Source: Bloomberg)

Investors in the initial public offering of Pershing Square Holdings Ltd. (PSH), one of the funds managed by activist investor Bill Ackman, saw the value of two of his biggest holdings plunge within hours of the sale closing.

Fannie Mae and Freddie Mac plunged in the U.S. after some investors lost a legal bid yesterday to force the bailed-out mortgage providers to share profits with private shareholders. Fannie Mae fell 37 percent to $1.70 at the close in New York and Freddie Mac dropped 38 percent to $1.65.

Ackman’s Pershing Square Capital Management LP -- the parent company of Pershing Square Holdings -- has about 11 percent economic exposure to the companies based on common stock outstanding. It filed a separate suit in August in the U.S. Court of Federal Claims in Washington, claiming the government’s diversion of profits violates the Constitution’s Fifth Amendment, which prohibits the taking of private property for public use without just compensation.

In May, Ackman said the companies’ shares would soar over time because there is no way to replace the mortgage guarantee companies.

“Clearly it’s a disappointment for those betting on Ackman,” said Erik Gordon, professor at the Ross School of Business at the University of Michigan in Ann Arbor. “Most people are thinking it’s probably still a good investment but short-term expectations are different when such big holdings are down by a third.”
Photographer: Jin Lee/Bloomberg

Pershing Square Holdings Ltd., one of the funds managed by activist investor Bill... Read More
Increased IPO

Pershing Square Holdings today said it raised $2.7 billion in the IPO, compared with an initial target of $2 billion. The total amount of capital raised is $3.07 billion, giving the fund a market capitalization of $6.2 billion when shares start trading. The additional amount includes a private placement to existing investors in Pershing Square International and a $129 million subscription by the management team of Pershing Square Capital Management LP.

Pershing Square Capital, with about $14 billion under management, is following hedge funds including Brevan Howard Asset Management LLP and Third Point LLC in selling shares of individual funds. The IPO comes on the heels of a buoyant quarter globally for share sales, with companies raising amounts not seen since 2010 -- even excluding the record-breaking sale of Alibaba Group Holding Ltd.

Thirty cornerstone investors bought about 63 million of the shares offered. The shares were priced at $25 apiece. The IPO will begin trading on Oct. 13 on Euronext Amsterdam.
Permanent Capital

An IPO will enable the fund to “invest a greater percentage of our assets in activist commitments on a long-term basis, and improving our ability to take advantage of market dislocations,” Ackman said in a statement on Sept. 15. The majority of his existing investments are in the U.S.

Ackman has said he’s wanted to raise permanent, public capital since at least 2011 to avoid a repeat of the financial crisis, when investors withdrew about 27 percent of his New York-based firm’s funds.

“The completion of the offering of Pershing Square Holdings is a seminal event in the history of the firm,” Ackman, chief executive officer and founder of Pershing Square, said today. “We are extraordinarily appreciative of the many new and existing investors who have chosen to participate.”

Anne Farlow has been appointed as chairman of the board of directors of the company, according to the statement. Farlow is an experienced private-equity investor who has been on the boards of 17 companies over the past 22 years, it said.

Deutsche Bank AG and UBS AG (UBSN) managed the IPO.

To contact the reporter on this story: Ruth David in London at [e-mail]

To contact the editors responsible for this story: Jacqueline Simmons at [e-mail] Elizabeth Fournier, Aaron Kirchfeld

http://www.bloomberg.com/news/2014-10-01/ackman-s-pershing-square-raises-2-7-billion-in-amsterdam-ipo.html