Bill Ackman's Brutal Target Losses

Equity Private, guest-blogging over at Dealbreaker, has the H2 2007 reports from Pershing Square IV, the Bill Ackman hedge fund devoted to going long Target (TGT). Which hasn't worked out so well. He lost $52,872,231 on Target stock, which is bad - but he also lost $669,510,931 on Target call options, which is just brutal. And that's just the unrealized losses. There's $40,811,094 in realized losses on the stock, as well as $93,984,727 in realized losses on the options.

Add it all up, and by the end of the year Ackman's fund showed a net loss of almost $853 million, which is a lot of money even by his standards. Still, we're in April now, Target might have recovered a bit since year-end, no? Well, the stock closed the year at $49.87, and it's now at $53.42. Carry on at that rate, and - oh, never mind. Let's go back to MBIA. At least that's still looking good for Ackman.

Comments

[Stock Miser]

I'm always skeptical of investors, even those with deep pockets like Ackman, who invest in companies with the sole purpose of trying to change the business model of companies they invest in. Even if the goal of creating greater long-term profit (and presumably greater shareholder value) is there, why do investors like Ackman think they know more about a company than the company executives?

Having said that, in hindsight, it seems clear that Ackman must have had some inkling of an idea that the credit bubble was about to pop since he had suggested that Target should sell its credit card business as soon as his stake in Target was made public. Target subsequently has sold off at least a portion of it, and probably received a much lower value for doing so than if Target had originally followed suit at the time Ackman had offered the suggestion.

So, was Ackman brilliant (despite current losses), or was Target stupid, or was it something else completely?