Investors ‘Suffered’
“Shareholders have suffered from a persistently wide and growing discount to NAV, which is even more remarkable given the company’s investment portfolio is comprised of large-cap, liquid, listed securities,” he said.
AVI, which was formerly known as British Empire Trust, said in its half year 2019 report that it had made an additional investment in Pershing Square on a hedged basis at the end of the fiscal year on a hedged basis by shorting most of the company’s underlying holdings. AVI’s investment improves with the narrowing of the discount to net asset value. But the shorts also cost it money to hold.
Treanor said Tuesday that about 44% of AVI’s 6.7 million shares were hedged by shorts in Pershing Square’s underlying holdings, like Starbucks Corp., Restaurant Brands International Inc. and Chipotle. The firm said in the mid-year report that the long, unhedged portion of its investment added 68 basis points to its returns, while the hedged portion detracted 25 basis points due to the strong performance of the underlying holdings and modest discount widening.
AVI’s letter comes after Fitch Ratings downgraded Pershing Square Holdings’ rating to two levels above junk on Monday, warning that the new notes would increase its leverage ratio. The ratings firm also noted that “increasingly shareholder-oriented actions” such as paying a dividend and share buybacks were “detrimental” to the company’s credit profile.
Bloomberg News.