Bill Ackman's Pershing Square Receives Borders Group (BGP) Warrants

Bill Ackman's hedge fund Pershing Square Capital Management recently filed a Form 4 with the SEC regarding shares of Borders Group (BGP). In the filing, we see that Ackman received BGP warrants on September 30th, 2010. The hedge fund has received warrants in the past which we also detailed back in May.

As a result of certain anti-dilution adjustments outlined in Pershing Square's previous 13D filing, Bill Ackman's firm has received warrants to purchase an aggregate of 8,542,399 shares of common stock of BGP. The exercise date is September 30th and the expiration date is October 9th, 2014. These warrants have a conversion/exercise price of $0.65 . In total, all of Ackman's related entities now own 25,944,236 BGP warrants.

In terms of other recent activity out of his hedge fund, Bill Ackman bought BP (BP) credit default swaps in the second quarter. You can view Pershing Square's entire portfolio in our new newsletter: Hedge Fund Wisdom.

Taken from Google Finance, Borders Group is "an operator of book, music and movie superstores and mall-based bookstores. As of January 30, 2010, Borders operated 511 superstores under the Borders name, including 508 in the United States and three in Puerto Rico."

To hear Bill Ackman's latest investment ideas, he's speaking at the Value Investing Congress in New York City next week. Sign-up here as only a limited amount of tickets remain.

Bill Ackman's Pershing Square Receives Borders Group Warrants (BGP)

In a Form 4 filed with the SEC last evening, we see that Bill Ackman's hedge fund firm Pershing Square Capital Management has received warrants to purchase shares of common stock in Borders Group (BGP). The transaction date was May 21st and the warrants expire October 9th, 2014 with a conversion price of $0.65. Pershing received warrants to purchase an aggregate of 2,701,837 shares of BGP. Additionally, due to an adjustment, Pershing's hedge funds will also be issued warrants to purchase 8,542,399 shares of common stock. Since Pershing's hedge funds have ownership interests in BGP Holdings, Ackman's funds have exposure to a total amount of 17,401,837 warrants. As of March 31st, we saw that Ackman owned 10,597,980 shares of common stock when we looked at Pershing Square's portfolio.

As per Pershing's recently filed 13D on BGP, we see that Ackman's firm has a 31.5% ownership stake in the company with an aggregate amount of common stock beneficially owned totaling 27,999,817. Ackman's Borders exposure also includes cash settled total return equity swaps covering 4,376,163 notional shares of common stock which are not included in the above totals. As such, Pershing's aggregate economic exposure to Borders Group is then 36.4%. For background on Bill Ackman, check out our profile of Pershing Square.

Taken from Google Finance, Borders Group is "an operator of book, music and movie superstores and mall-based bookstores." If you want to learn more about Ackman and his investing style, he is the subject of Christine Richard's new book, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff.

Bill Ackman's Pershing Square Dumps McDonald's & EMC: 13F Filing Analysis

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up we have Bill Ackman's hedge fund Pershing Square Capital Management. Ackman runs a value and activist fund with a highly concentrated portfolio so they are ideal for tracking purposes. He received his degree from Harvard and his MBA from Harvard Business School. For investment insight from Ackman, check out his recent television appearance and Pershing's investor letter. For more information on the hedge fund, check out our profile of Bill Ackman & Pershing Square.

The positions listed below were their long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. Note that we are only covering the major portfolio maneuvers. All holdings are common stock unless otherwise denoted.


Brand New Positions
Hyatt (H) *see special note regarding this position below
Landry's Restaurant's (LNY) ~ see our previous coverage of this addition


Increased Positions
Corrections Corp of America (CXW): Increased by 48.7%


Reduced Positions
Automatic Data Processing (ADP): Reduced by 98%
Target (TGT): Reduced by 20%


Removed Positions (Sold out completely):
EMC (EMC)
McDonald's (MCD)


Top Holdings by percentage of assets reported on 13F filing

1. Target (TGT): 71.17%
2. Corrections Corp of America (CXW): 19%
3. Hyatt Hotels (H): 5.84%
4. Landry's Restaurants (LNY): 2.34%
5. Borders Group (BGP): 0.89%
6. Greenlight Capital Re (GLRE): 0.42%
7. Automatic Data Processing (ADP): 0.35%
   

Firstly, realize that the above list is not complete. We already saw that in January 2010, Ackman made Kraft (KFT) their largest holding and we detailed Pershing's presentation on KFT. Since the above positions were as of December 31st, their KFT stake doesn't show up. Additionally, as detailed in Ackman's previous investor letter, Pershing has started a Nestle position as well that doesn't show up in the filing.

Pershing Square also shows a new position in Hyatt Hotels (H) as of December 31st, 2009. However, this gets a little tricky as they also filed an amended 13G that shows Pershing owning 0 shares as of January 7th, 2010. So, upon inspection, it appears as if Pershing bought shares of H in the fourth quarter of 2009 and then sold out of the position in the first week of 2010. We're looking into this situation deeper to confirm this was the case, as we could have misinterpreted this.

The biggest story in Pershing's portfolio will be the removal of their McDonald's (MCD) and EMC (EMC) positions, both previously sizable stakes. Additionally, they sold practically all of their ADP as well. They had been buying shares of these companies over the past two quarters but decided to dump them recently. Ackman's hedge funds run highly concentrated portfolios and as such each shift is typically a major one. They also started a new stake in Landry's, and we already covered this addition when it happened.

Additionally, we see that Pershing added to their stake in Corrections Corp of America and we have previously posted Pershing's presentation on CXW. On the other side of the portfolio, we also know that Pershing has been short Realty Income (O) and we posted up their short thesis here.

Keep in mind that Pershing still owns General Growth Properties (GGWPQ) but that stake does not appear on the filing as it's not deemed a reportable security by SEC standards (most likely due to it's OTC trading nature since it has been going through bankruptcy). And, as far as we know, they still own both equity and unsecured debt. Pershing will be happy to see that Simon Property Group recently bid for GGP, but will be unhappy at the offered price, arguing that GGP is worth more than that. We've long detailed Pershing's bullish analysis of the mall REIT operator. In the past we've presented Pershing's original GGP thesis and their recently updated analysis.

Assets from the collective holdings reported to the SEC via 13F filing were $1.4 billion this quarter compared to $3.1 billion last quarter, so a notable decline in assets invested on the long side. Remember that these filings are not representative of the hedge fund's entire base of assets under management. Therefore, the figures above represent the percentage of their reported 13F assets, not their entire portfolio.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, and Stephen Mandel's Lone Pine Capital. Check back daily for our new updates.