CNBC Faber Notes Letter To Clients From Ackman's Pershing Square on Target (TGT)

On CNBC, David Faber noted a recent letter that William Ackman's Pershing Square Capital sent to investors in their Pershing Square IV fund related to the fund's Target (NYSE: TGT) investment.

Pershing Square owns a nearly 10% stake in Target, mostly through options.

Faber noted that Pershing Square is significantly underwater on the position due to Target's weak stock performance.

In the letter, Ackman said they believe the stock is significantly undervalued. Ackmam supports the company's decision to postpone the sale of the receivables unit due to the weak credit markets. Ackman said the stock could go to $120 in three years if the company completes the stock buyback, sells the credit card unit and explores a potential real estate transaction.

Ackman's Pershing Square Boosts Target (TGT) Stake to 9.97%

In an amended 13D filing on Target (NYSE: TGT), William Ackman's Pershing Square disclosed a 9.97% stake (82,797,200 shares) in the company. This is up from the 9.6% stake (81,761,411 shares) the firm held in a past filing.

Much of Ackman's position in held through call options, exercisable through dates ranging from October 2, 2008 to April 6, 2009.

Pershing Square noted that their representatives have met and may in the future meet with Target's management to engage in discussions that may include matters relating to the strategy, business, assets, operations, capital structure and/or financial condition in an effort to enhance shareholder value.

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?

Reports Ackman's Pershing Square Accumulated 5%+ Stake in Target (TGT)

According to reports from Bloomberg, activist investor William Ackman, through his Pershing Square hedge fund, has built up a greater than 5% stake in Target (NYSE: TGT), citing a person with knowledge of his actions.

Ackman is expected to disclose the stake shortly, as would be required by SEC rules.

Recent reports suggested Ackman raised $2 billion that was to be used in a new fund that will focus on just one large "iconic American" company.