There’s little chance the young tourists at the Brooklyn Diner on West 57th Street will recognize Bill Ackman, the tall, silver-haired and strikingly handsome billionaire hedge-fund manager, when he saunters in 10 minutes late from his office upstairs to meet me for lunch. Although he’s well known among activist investors and to the financial media, he’s not much of a household name. But the diner’s proprietors—“I know the owners,” Ackman mentions in passing—do notice him, and they quickly reseat us from a small cramped booth in the middle of the restaurant to a larger one over to the side. “Most expensive diner in Manhattan,” he declares after we sit down again.
Even though the weather outside is cold and gray, and has been for months, Ackman’s disposition is preternaturally warm and sunny, and why not? At 48, he’s fabulously wealthy—with expensive homes in Manhattan and the Hamptons and his own elegant Gulfstream jet to take him anywhere he wants at any time—and he is widely admired for his investment prowess. In 2014, the group of four hedge funds he manages, collectively known as Pershing Square Capital Management, returned around 40 percent, net, to his investors and ended the year with $18 billion under management. (Now, a few months later, he’s managing around $20 billion.)
Ackman’s aggressive brand of activist investing has drawn plenty of detractors as well. One of his biggest nemeses is Marty Lipton, the 82-year-old founder of the powerful Wall Street law firm Wachtell, Lipton, Rosen & Katz and a staunch defender of the status quo. Wachtell, Lipton often, and happily, finds itself being hired to defend corporations against the likes of Ackman. Last October, at a conference at the Plaza Hotel in New York, Lipton gave a speech titled “Activist Interventions and the Destruction of Long-Term Value.” Ackman was sitting in one of the front rows.Ackman has said he would like to debate the issue with Lipton in front of a live audience. But so far, Lipton has demurred. “There is no way on earth I would debate Mr. Ackman,” Lipton told Bloomberg, in January. “You know how I feel about him. It would be beneath me.” I suggest to Ackman he would certainly get Lipton’s attention if he agreed to donate $100 million to New York University, where Lipton has long been a powerful member of the board of trustees, including serving as board chairman.
Ackman takes the bait. “I would give a donation to N.Y.U.,” he says. “You can offer him this one: I’ll give a million dollars to N.Y.U. O.K.? Either he has to make a donation to the charity of my choice or I make a donation to the charity of his choice if we have a real debate on the topic and the audience votes and whoever wins, wins. How’s that?” I offer to moderate.
Ackman is clearly happy with his recent financial performance. He’s feeling vindicated after a rough 2013, when he got criticized, nearly mercilessly, for a poor investment in J.C. Penney and what was looking for sure like a bad, highly publicized $1 billion bet that the stock of Herbalife Ltd., the multi-level marketer, would collapse. “Pershing Square was kind of stress tested in 2013,” he says. He then reminds me that when he decided to sell his stake in J.C. Penney, after an embarrassing episode where the board ultimately fired the C.E.O. that Ackman had recruited from Apple in a failed effort to turn around the retail battleship, “Everyone said we were idiots.” He sold the stock when it was $13 a share and, he claims, many people bought it on the news that Ackman was selling. Now, it’s around $7.70 per share. He’s trying not to gloat.
As we eat, Ackman brings me up to date on his Herbalife crusade, which he once said he would pursue “to the end of the earth.” That’s still the plan, although as a fiduciary to his investors, he reminds me that he’s obligated to examine the bet every day to make sure it still makes sense to him. After reaching a high of $81.81 a share in January 2014—the opposite of what Ackman was hoping for—the stock now trades around $36 per share. Even though he started betting against Herbalife in 2012, when the stock was trading around $47 per share, he has incurred around $50 million in expenses related to accumulating his short position, mostly for legal fees and research. He says his break-even point on his bet will be reached when Herbalife falls to the “low 30s” per share. If the stock goes to zero, as he continues to bet it will, he and his investors stand to make around $1 billion.
No surprise, Ackman remains as confident as ever about his bet against Herbalife. Ackman tells me Herbalife’s new outside public-relations guy, George Sard, has been going around New York trying to convince the media that Ackman and his colleagues at Pershing Square are the “bad ones” and “market manipulators” but “most media aren’t buying that one, as far as I can tell.” He was wrong about that. On March 12, The Wall Street Journal reported that both the F.B.I. and the U.S. Attorney’s Office in the Southern District of New York were looking into whether “people, including some hired by Mr. Ackman” had made “false statements” about Herbalife and its business in order to “spur investigations” into the company and to lower its stock price. The paper noted that neither Ackman nor Pershing Square had been interviewed or received subpoenas and that nothing might come of the probes. It was a classic retaliatory tactic. The next day, Ackman hit the airwaves and repeated his view that Herbalife is “a criminal enterprise” and going after his consultants is, essentially, a diversionary tactic. “Herbalife is a pyramid scheme,” he reiterates to me a few days after the Journal’s story appeared. “It will be shut down by regulators.”
