Value Investing

Bill Ackman Facing Redemption, Longfin Selling Restricted Stocks

Bill Ackman’s Pershing Square Capital Management is facing a wave of investor redemptions after the activist hedge fund suffered from three years of disappointing performance, The Wall Street Journal reported Thursday. Longtime stakeholder Blackstone Group has been withdrawing capital, while JPMorgan Chase’s asset management unit is no longer recommending clients invest in the fund. In the first quarter of 2018, Pershing Square’s total assets declined by 12% to $8.2 billion, compared to $20 billion in 2015. According to people familiar with the matter, Ackman still has confidence in his portfolio and believes its performance will improve going forward. The activist does not plan to replace the departing money, trying instead to position Pershing Square as a smaller fund that is able to make larger bets.

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What we'll be watching for this week

  • Will shareholders of Keweenaw Land Association vote in favor of Cornwall Capital Management’s three-person slate at the timber company’s annual meeting Thursday?
  • Will activist investor Starboard Value nominate a majority slate for election to the board of real estate investment trust Macerich?
  • Will shareholders of General Electric heed the advice of proxy advisory firms Institutional Shareholder Services and Glass Lewis and vote against auditor KPMG at the industrial giant's annual meeting?

Activist shorts update

The U.S. Securities and Exchange Commission (SEC) has accused Longfin executives of illegally selling restricted stock. The SEC said Friday that it obtained a court order to freeze the proceeds from the sale, which amounted to $27 million in profits. Longfin’s shares recently skyrocketed in value after the company acquired a blockchain company.

Short seller White Diamond targeted Longfin in mid-March, claiming the company’s market capitalization did not reflect its true value due to hype surrounding its cryptocurrency venture. Almost two weeks later, Citron Research tweeted that LongFin's filings and press releases were "riddled with inaccuracies and fraud."

Shares in Longfin hit lows of $8.11 last week, plummeting 81.5%, but later rallied to $28.19 when it was halted for volatility on Friday at 11:30 a.m. EDT. CEO Venkat Meenavalli said Wednesday that he planned to write to the SEC and the Financial Industry Regulatory Authority about the behavior of short sellers, who he blamed for the collapse of the company’s stock.

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Article by Activist Insight