Bill Ackman’s new fund owns about $50 worth of stock for every share it has issued. Those shares change hands in the high $30s. Buy one today and you are paying roughly 80 cents for a dollar of Amazon, Microsoft, Meta and the rest of the portfolio — and on Thursday, on his firm’s first earnings call as a public company, Ackman said that gap makes no sense and that he intends to close it.
“We think the trading of PSUS is frankly absurd, and we are going to take some steps to fix that,” the chief executive told analysts, referring to Pershing Square US, the closed-end fund he listed on the New York Stock Exchange in April.
Here is the mechanism in plain terms, because the whole story turns on it. A closed-end fund sells a fixed number of shares once, invests the money, and then never issues or buys back stock in the ordinary course. Unlike an exchange-traded fund, there is no machinery forcing the share price to track the value of what the fund owns. So the price is whatever buyers and sellers agree on that day, and it can drift well below the underlying holdings. That gap is the discount, and Ackman’s is running at about one-fifth.
The fund raised $5 billion at $50 a share and stumbled out of the gate on April 29, trading as low as $40.33 within minutes and closing the day at $40.90, down 18%. It has not recovered since, even as the broader market has climbed to record levels this week.
Ackman’s own diagnosis is that he mishandled who got the stock. The firm gave retail buyers a full allocation and cut institutions back sharply, in what he described as an attempt at democratizing access. His read is that individual investors asked for more shares than they expected to be handed, then sold what they did not want. The result was a supply of sellers and almost no steady buyers, on thin volume, with each trade nudging the price a little lower.
The plan to fix it has three parts, and none of them involve the portfolio itself. The first is marketing, which Ackman said is now unrestricted in a way his older London-listed fund never was — he can promote this one on television, on podcasts, and directly to financial advisers. His pitch to those advisers is that a client who buys in the open market gets the same portfolio at 80 cents on the dollar without the adviser having to pull money out of an account earning a management fee. The second is leverage: beginning in early September, the firm will meet with rating agencies to get the fund rated, then issue investment-grade bonds, targeting debt equal to 15% to 20% of total assets. That is roughly 0.15 to 0.2 times equity, against the eight to twelve times some hedge funds run. The third is a new vehicle, Pershing Square Ventures, targeted for late 2026 and aimed at private companies ranging from a few hundred million in valuation up to the $10 billion range — a portfolio, Ackman argued, that public investors could not assemble on their own and would therefore be less likely to price at a discount.
The underlying business had a solid quarter. Pershing Square Inc., the listed management company, reported earnings of 14 cents a share on revenue of $54.18 million. Fee-paying assets under management climbed $4.6 billion in the quarter to roughly $23 billion, and the firm said its portfolio was up 20% for the year to date. The fund was 95% invested by quarter-end, having deployed its cash during a volatile spring that Ackman said handed him the buying conditions he had hoped for.
Shares of the management company closed at $38.80 and added 2.8% to $39.89 in after-hours trading, leaving them well below the 52-week high of $54.94 and well above the $22.01 low.
There is a wild card in the portfolio that Ackman raised himself. The funds hold roughly 230 million shares of Fannie Mae and Freddie Mac at about $5 each. If the administration follows through on releasing the two mortgage companies from government control and relisting them, he argued, those become $40 or $50 stocks — an overnight increase of $8 billion to $9 billion in assets, or close to a third of the firm’s fee-paying base.
That is the bet an investor is making at a 20% discount: that the holdings are worth what Ackman says, and that enough buyers eventually agree to close the gap.
JBizNews Desk | Wall Street
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