Monday, July 16, 2007

Ackman's Pershing Square Accumulates Nearly 10% Stake in Target (TGT)

As was widely reported last week, William Ackman's Pershing Square Capital disclosed a large stake in Target (NYSE: TGT) this morning in a 13D. What was surprising to me was the size of the stake. Ackman's firm accumulated control over 9.6% (81,761,411 shares) of the stock in the huge retailer. Wow, nearly 10% of a $60 billion company! Amazing!

How did he do it? With options of course. Ackman owns options to purchase 79,213,351 TGT shares with strike prices ranging from $34.63 to $53.12 and exercisable through dates ranging from December 14, 2007 to April 6, 2009.

This goes to show that no company, no matter how big, is safe from activists. In a short time, a small group (or one firm in this case) can take large chunks of a company and impose their will.

Is this positive or negative for corporate America?

My view is that it is mostly positive (80/20). Positive in that it keeps management on their toes and working for the shareholders. Negative in that hedge fund managers who run money for a living are making suggestions on how to run huge corporations which they may know nothing about.

What do you think?

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Anonymous Anonymous said...

Yeah - look at Sears. Lampert is a genius hedge fund manager, but not a retailer. Hopefully the real estate is worth something.

11:21 AM  

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