Pershing Square's Economic Exposure to General Growth Properties (GGWPQ) ~ market folly

Wednesday, March 3, 2010

Pershing Square's Economic Exposure to General Growth Properties (GGWPQ)

Due to activity on February 24th, 2010, Bill Ackman's hedge fund firm Pershing Square Capital Management has updated us on the size of their General Growth Properties (GGWPQ) stake. In an amended 13D filed with the SEC, Pershing has disclosed a 7.5% ownership stake with 23,953,782 shares. (This total is based off of 317,304,759 common shares outstanding). However, if you dig into the fine print you see that Pershing also has economic exposure to 54,907,669 shares via total return swaps. As such, their total exposure is 78,861,451 shares. This brings their total aggregate economic exposure in General Growth Properties to 24.9% of outstanding common shares. While it is just speculation on our part, we'd estimate that Ackman has made easily over $700 million on this investment. Not to mention, the scenario is still playing out with further possible upside. Also, it just recently hit the news wires that General Growth has won four more months to control its bankruptcy. President and CCO Tom Nolan will be on television tomorrow morning, undoubtedly to talk about the developments.

Our apologies for not posting this up sooner for those interested. This finally gives us a true look at Pershing's overall exposure to General Growth. Remember that in the past the SEC had deemed General Growth an 'un-reportable security' most likely due to the fact it was emerging from bankruptcy. As such, we had been kept somewhat in the dark as to exactly how much GGWPQ they owned these days. In addition to the amended 13D, Pershing Square also attached two exhibits regarding the proposed venture with Brookfield Asset Management. Those following the specifics of this ordeal should make sure you read exhibit A and exhibit B if you haven't already.

Overall, things appear to be panning out in Pershing's favor and they'll have undoubtedly made a boatload of money on this play. For more on this hedge fund, head to our post detailing Bill Ackman's portfolio as well as our profile of Pershing Square.

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