Bill Ackman, the billionaire activist investor who is head of the Pershing Square Capital Management hedge fund, has held a stake in master-planned community developer Howard Hughes Corporation (NYSE: HHC) since its 2010 spin-off from General Growth Properties.
However, Ackman clearly sees value in the real estate company, as he's multiplied Pershing's stake several times over since the COVID-19 pandemic sent shares plunging. And he apparently still sees value, even after a big rally.
Ackman just bought even more Howard Hughes Corporation
According to an SEC filing that was released on Jan. 11, Pershing Square acquired an additional 2,552,000 shares of Howard Hughes Corporation's common stock.
Of the newly purchased shares, 610,000 were the result of put options being exercised. The other 1,942,000 shares were bought on the open market using Pershing Square's own capital.
After these purchases, Pershing Square owns 13,470,008 shares of Howard Hughes, which translates to a 24.5% ownership stake. So, to make a long story short, Ackman and Pershing Square now own nearly one-fourth of Howard Hughes Corporation's stock. At the stock's current price as of Jan. 12, this makes Pershing's investment worth just over $1.1 billion.
Interestingly, this isn't the first time Ackman has added to his Howard Hughes investment during the COVID-19 pandemic. When the market was crashing in March and Howard Hughes needed to raise capital by selling 12 million shares, Ackman bought 10 million of them. In fact, while Ackman (who is also Chairman of Howard Hughes' board of directors) has held a stake in the company for about a decade, the bulk of Pershing's current Howard Hughes' investment was acquired within the past year.
Why it's significant to investors
When Ackman bought 10 million shares of Howard Hughes in March 2020, he did so at a fire-sale price of $50 per share. The stock (along with most of the market) was in free fall, and patient investors with capital could get excellent bargains at that point.
However, since that time, Howard Hughes' stock price has risen by nearly 60%. According to the SEC filing, the 1,942,000 shares that were purchased on the open market were bought for a total of $153,651,040. This implies an average purchase price of $79.12 per share that Ackman was willing to pay.
The point is that Ackman paid significantly more for this round of Howard Hughes stock than the last one, and he did so to add on to an already enormous stake in the company. So, although the stock has risen significantly since last March, Ackman clearly still sees quite a bit of long-term potential for value creation.
The Millionacres bottom line
To be sure, it's generally not a smart idea to buy a stock just because a billionaire does. However, the fact that Howard Hughes' own chairman is willing to put hundreds of millions of dollars towards increasing an already massive stake after a big rally in the stock price is certainly an encouraging development. If Ackman is right and Howard Hughes successfully unlocks the value in its master-planned communities over the coming decades, Ackman stands to make billions.