Activist investor Bill Ackman, has been attacking his new target, Canadian Pacific Railway Limited (NYSE:CP) (TSETSE:CP). Recently, Ackman sent a letter to other Canadian Pacific Railway Limited shareholders trying to rally them into pressuring the board of directors into stepping down and putting in a new board and placing Hunter Harrison as the new CEO.
This call for action comes a month before a shareholder vote and the company’s first quarter earnings release.
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The manager of Pershing Square Capital Management, Bill Ackman, believes that the board is constricting shareholder value and the investor believes that it takes more than one quarter to become a well, oiled business.
In the letter Ackman sent out to the rest of Canadian Pacific Railway Limited (NYSE:CP) (TSETSE:CP) shareholders, he attacks the stock’s negative performance and the board of directors’ greed.
Under current CEO, Fred Green, the stock has returned a negative 18% while he has been able to earn $32 million in compensation during that same time. Once
Ackman saw this set up, he knew this could be a great investment opportunity. In fact, since he started buying Canadian Pacific back in September, the hedge fund manager has spent $1.4 billion for a 14% stake in the company, the largest in the firm’s history.
In the latter half of the letter, Ackman outlines his solution to the problem. The investor believes that Hunter Harrison would be a great CEO because of his past experience with railroads. To show that he means business, Mr. Harrison has already bought $5 million worth of Canadian Pacific stock.
I think Bill Ackman picked a good company to improve. Canadian Pacific Railway Limited has been a dud for the past six years since the current CEO, Fred Green arrived. If Ackman was able to clean out the board and CEO, CP could be a brand new company that actually cares about shareholder value.
Isn’t it amazing when you see a CEO’s tenure and all there is to show is a declined stock price but huge personal compensation? The board of directors should have fired Green long ago but instead they decided to just pay him more. That is why it is necessary to clean house and start over again. Obviously, management of CP is not in it for the shareholders.
May 17th is the investor’s vote for the board of directors and CEO. We will see if Ackman is able to work his magic and clean house of all the anti-shareholder executives. Keep an eye on the news for more on this story.
Full press release can be found below: