Bill Ackman's Public Vendettas

In December 2012, Bill Ackman — the founder of Pershing Square Capital Management — held a 3-hour public presentation at the Sohn Investment Conference titled "Who Wants to Be a Millionaire?" The presentation was a detailed argument that Herbalife, the multi-level marketing nutrition company, was operating an illegal pyramid scheme. Ackman had taken a $1 billion short position in the stock. He predicted Herbalife would be forced to "go to zero" once regulators acted on the evidence he was presenting. He spoke for hours, with PowerPoint slides, charts, and what he described as definitive evidence of the company's fraudulent structure.

Seven years later, in February 2018, Ackman closed the short position at a substantial loss. The 7-year campaign had consumed an enormous amount of his fund's capital, his personal time, and his public reputation. Herbalife was still operating, still pubic, still facing some regulatory scrutiny but never the company-ending consequences Ackman had predicted. Carl Icahn, who had taken the opposite side of Ackman's trade, profited substantially.

The Herbalife short became one of the defining events of Ackman's career, and the questions it raised about activist short investing — and about the limits of public-pressure campaigns — have continued to define his subsequent strategic choices.

The Earlier Successes. Before Herbalife, Ackman had built a reputation as one of the most effective activist investors in modern Wall Street. He had successfully forced strategic changes at Wendy's, McDonald's, Target, and Canadian Pacific Railway. His proxy fight at Canadian Pacific in 2012 — which installed Hunter Harrison as CEO and produced multi-billion-dollar shareholder returns — was widely cited as a textbook activist victory.

The Valeant Disaster. Following Herbalife, Ackman made another high-conviction bet on Valeant Pharmaceuticals, the controversial drug-pricing company. Valeant collapsed in 2015-2016 amid disclosure concerns and price-gouging accusations. Pershing Square's losses on Valeant exceeded 4 billion dollars. The combined losses on Herbalife and Valeant produced a multi-year period of underperformance that nearly destroyed Pershing Square's institutional credibility.

The 2017-2018 Pivot. Ackman responded to the consecutive losses by fundamentally restructuring Pershing Square's approach. He moved away from concentrated activist positions and toward a more diversified long-only strategy. He stopped giving as many press interviews. He focused his fund on quality-businesses-at-fair-prices investments. The pivot worked. Pershing Square produced substantial returns in 2019-2024, with several notable trades (Hilton, Restaurant Brands, Universal Music Group) producing meaningful results.

The Recent Moves. In 2024, Ackman launched Pershing Square USA Ltd., a closed-end fund offering retail investors direct exposure to his strategies. The launch was originally planned at 25 billion dollars but was scaled down to 4 billion when retail demand was weaker than projected. The retail product launch represented Ackman's attempt to extend his investment philosophy beyond the institutional client base that had been central to Pershing Square for two decades.

The Larger Lesson. What Ackman's career demonstrates is the difference between being right and being early. Several of his short-side criticisms of companies have eventually been proven correct in some form. Herbalife continues to face regulatory pressure. Valeant collapsed (eventually) for many of the reasons Ackman cited. The accuracy of his analysis was often higher than the timing of his trades.

For activist short investors, the practical lesson is that timing is essential and that public-pressure campaigns can backfire when the target has sufficient resources to resist. Herbalife was able to maintain its operations for years longer than Ackman predicted, in part because the legal and regulatory processes that he was relying on operate on slower timeframes than equity markets.

For most investors, the takeaway is humility. Even excellent analysts working with substantial capital and full attention can be wrong about timing in ways that destroy investment value. Ackman's Herbalife short was, in retrospect, an aggressive bet on a regulatory outcome that did not occur. The cost was substantial.

The current Pershing Square is more diversified, more disciplined, and less publicly confrontational than the 2012-2017 era version. The strategic lessons from the difficult years appear to have been internalized. Whether this represents a permanent change in approach or a temporary reset remains to be seen.

Now go enjoy your Saturday.

Sources: - Pershing Square Capital Management 13F filings - Industry coverage: Bloomberg, Wall Street Journal, FT - "When the Wolves Bite" by Scott Wapner (book, 2018)