Bill Ackman
speaker
1,217 appearances
6 recordings
6 series
first heard Feb 2024
last heard 3 Jun
Bill Ackman’s voice in public audio — every appearance, attributed to the second.
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recordings per month · last 12 monthsRecordings per month over the last 12 months — 2 in all, peaking in Jun 2026 with 2.
Appearances
It was a good one. All right. But it wasn't a trade. I wouldn't describe it as a trade. A trade is something you buy and you flip. This is something where we made the investment initially in November of 2008. and we still own a company we spun off of General Growth, and it's now 15 years later.
Sure. So this was at the time of the financial crisis, circa November 2008. Real estate's always been a kind of sector that I've been interested in. I began my career in the real estate business working for my dad, actually. arranging mortgages for real estate developers. I have deep ties and interest in the business. General Growth was the second largest shopping mall company in the country.
Simon Properties, many people have heard of. General Growth was number two. They own some of the best malls in the country. At that time, people thought of shopping malls as these non-disruptible things. Again, we talk about disruption. Malls have been disrupted in many ways.
Uh, and general growth stock, uh, the general growth, the company, the CFO in particular was very aggressive in the way that he borrowed money. And he borrowed money from a kind of wall street, uh, not long-term, uh, mortgages, but generally relatively short-term mortgages. It was pretty aggressive as the value went up, he would borrow more and more against the assets.
And that helped the short-term results of the business. The problem was during the financial crisis, the market for what's called CMBS, commercial mortgage-backed securities, basically shut. And the company, because its debt was relatively short-term, had a lot of big maturities coming up that they had no ability to refinance. And the market said, oh my God,
The lenders are going to foreclose and the shareholders are going to get wiped. The company's going to go bankrupt. They're going to get wiped out. The stock went from $63 a share to 34 cents. So, and there was a family, the Bucks bound family owned, I think about 25% of the company. And they had a $5 billion, $5 billion of stock that was worth 25 million or something by the time.
we bought a stake in the business. And what interested me was I thought the assets were worth substantially more than the liabilities. The company had 27 billion of debt. and had $100 million value of the equity down from like 20 billion. Okay. And one that, you know, sort of an interesting place to start with a stock down 99%.
But the fundamental drivers, the mall business, our occupancy, how occupied are the malls? Occupancy was up year on year between 07 and 08, interestingly. Net operating income, which is kind of a measure of cashflow from the malls, that was up year on year. So kind of the underlying fundamentals were doing fine.
The only problem they had is they had billions of dollars of debt that they had to repay. They couldn't repay. And if you kind of examine the bankruptcy code, it's precisely designed for a situation like this, where it's kind of this resting place you can go to kind of restructure your business. Now, the problem was that every other company that had gone bankrupt, the shareholders got wiped out.
And so the market's seeing every previous example, the shareholders get wiped out. The assumption is the stock is going to go to zero. But that's not what the bankruptcy code says. What the bankruptcy code says is that the value gets apportioned based on value.
And if you could prove to a judge that there was the assets worth more than the liabilities, then the shareholders actually get to keep their investment in the company. And that was the bet we made. And so we stepped into the market and we bought 25% of the company in the open market for, we had to pay up. It started out at 34 cents. I think there were 300 million shares.
So it was at $100 million value. By the time we were done, we paid an average of, we paid 60 million for 25% of the business. So about $240 million for the equity of the company. And then we had to get on the board to convince the directors the right thing to do. And the board was in complete panic, didn't know what to do, spending a ton of money on advisors.
And, you know, I was a shareholder activist, you know, four years into Pershing Square and no one had any idea what we were doing. They thought we were crazy. Every day we'd go into the market and we'd buy this penny stock. And we'd file what's called a 13D, every 1% increase in our stake. And people just thought we were crazy. We're buying stock in a company that's going to go bankrupt.
Bill, you're going to lose all your money. You know, run. Okay. And I said, well, wait, you know, bankruptcy code says that if there's more asset value than liabilities, we should be fine. And the key moment, if you're looking for fun moments, is there's a woman named Maddie Buxbaum, who was from the Buxbaum family. And her cousin, John, was chairman of the board, CEO of the company.
And I said, as she calls me after we disclose our stake in the company, she's like, Billy Ackman, I'm really glad to see you here. And I met her like, I don't think it was a date, but I kind of met her in a social context when I was like 25 or something. And she said, look, I'm really glad to see you here. And if there's anything I can do to help you, call me. I said, sure.
We kept trying to get on the board of the company. They wouldn't invite us on. Couldn't really run a proxy contest, you know, not with a company going bankrupt. And their advisors actually were Goldman Sachs. And they're like, you don't want the fox in the hen house. And they were listening to their advisors.
So I called Maddie up and I said, Maddie, I need to get on the board of the company to help. And she says, you know what? I will call my cousin and I'll get it done. Mm-hmm. she calls back a few hours later, you'll be going on to the board. I don't know what she said to her because... What she was convincing.
Next thing you know, I'm invited to on the board of the company and the board is talking about The old equity of general growth. Old equity is what you talk about the shareholders are getting wiped out. I said, no, no, no. This board represents the current equity of the company. And I'm a major shareholder. John's a major shareholder. There's plenty of asset value here.
This company should be able to be restructured for the benefit of shareholders. And we led a restructuring for the benefit of shareholders. And it took, let's say, eight months. And the company emerged from chapter 11. We made an incremental investment into the company. And the shareholders kept the vast majority of their investment.
All the creditors got their face amount of their investment, par plus accrued interest. And it was a great outcome. All the employees kept their jobs. The mall stayed open. There was no liquidation. The bankruptcy system worked the way it should. I was in court all the time.
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