Bill Ackman’s publicly traded Pershing Square Holdings Ltd. has an activist of its own.
Asset Value Investors Ltd., or AVI, which owns a 3% stake in the London-listed firm, is pushing back against Pershing Square Holdings’ decision to issue $400 million of 20-year debt without consulting shareholders.
The firm already has more debt than most of its peers and selling more bonds will constrain its ability to narrow the gap between its stock price and net asset value, according to a letter AVI sent Tuesday to Pershing Square Holdings Chairman Anne Farlow. It wants the firm to halt the debt plan and pursue a more aggressive share buyback program to close that gap. Net asset value represents the value of an investment firm’s assets minus liabilities.
“We are staggered that the board has decided to further tie its hands in this way,” AVI Executive Director Tom Treanor said. “This latest episode has confirmed to us that shareholders would likely benefit from a newly reconstituted board willing and able to properly defend and represent shareholders’ best interests.”
A representative for Pershing Square Holdings declined to comment.
Chipotle, Hilton
Pershing Square Holdings is a closed-end fund that primarily invests in companies based in North America, with stakes in Chipotle Mexican Grill Inc., Hilton Worldwide Holdings Inc. and Automatic Data Processing Inc. as of May 17, according to regulatory filings.
It’s managed by Pershing Square Capital Management, Ackman’s activist fund.
Shares in Pershing Square Holdings have risen about 41% this year, bolstered by the introduction of a dividend and share buyback programs. It closed at 14.70 pounds ($18.23) in London trading Tuesday. The firm has also returned almost 48% on its investments through July 9, according to its website.
But its share price still trades at a nearly 30% discount to its net asset value, according to Treanor. He also pointed out that its shares have fallen about 26% since it went public in 2014, while the S&P 500 has gained about 74% over the same time period.