Ackman & Pershing Square, More Formidable With More Capital (TGT, JCP, FDO, BBY, FO, C)

Bill Ackman and his Pershing Square could soon become a much more formidable activist when it comes to dealing with companies.  Target Corporation (NYSE: TGT) might have not been one of Ackman’s greatest success stories, but J. C. Penney Company, Inc. (NYSE: JCP) looks to be coming along better.  With Pershing taking a big stake in Family Dollar Stores Inc. (NYSE: FDO) and with him rumored to now have taken the “value” stake in Best Buy Co. Inc. (NYSE: BBY), imagine what Ackman might be able to accomplish if he gets access to more capital.

Absolute Return is signaling that Ackman is looking for more capital from the public markets. Stable Capital.  The sum floated out there is $3 billion.  Since Ackman has to always keep some liquidity for redemptions or to add to existing positions, more capital would give this activist investor more powder to go after larger fish.

Call it activist investing, corporate raiding, turnaround investing, or value investing… This strategy offers a little for almost everyone.  And if Ackman gets his way he is going to be able to be a lot more vocal.

Our own take on Best Buy Co. Inc. (NYSE: BBY) is that there is value here whether or not Ackman is in it or not.  This one went up on Wednesday when the broader market was a sea of red.  When we called it as being value after its earnings, it would have just been assumed that the caveat “unless the stock market tanks” could have been included.  Still, Best Buy stock was up on a day when the DJIA was down close to 200 points.  Imagine if the market had risen.

Fortune Brands Inc. (NYSE: FO) is another one which has buckled to pressure from Ackman.  He even once upon a time noted that Citigroup Inc. (NYSE: C) has a value far higher around the time it was thought as one which could still double.

Whether or not Ackman gets a new fund or conducts a public offering of some form would probably come with some caveats.  Regardless, it would give this activist investor more capital to make either a broader range of targets or one that can better hone in on larger targets and still be able to have a voice.

An activist investor, or a group of activist investors, can all go after any company of any size.  The problem is that they can’t have any power other than for one day or just a few days a year when shareholder meetings occur and when other presentations are made.  Many companies are either tightly controlled or they have a management team that doesn’t buckle to outside pressure.  A few billion more would give Ackman a louder voice at larger companies.

By the way, if Ackman is successful in this effort then you might as well expect that other activist investors will go to the public to raise capital as well.

JON C. OGG