Bill Ackman bet on a winner amid the coronavirus (COVID-19) pandemic.
On March 18, the founder of Pershing Square Capital said on CNBC that at the rate the coronavirus is spreading, the American economy will enter a “depression-era period” and as many as a million Americans could die. Ackman said the only solution was for President Donald Trump to shut down the country for 30 days.
“America will end as we know it,” Ackman said at the time. “…hell is coming to corporate America.”
In February, Pershing Square funds purchased credit default swaps (CDS) on various investment grade and high yield credit default swap indices.
Pershing Square completed the exit from Ackman’s bets against the market on March 23 “and generated $2.6 billion compared with premiums paid and commissions totaling $27 million,” according to CNBC. “The amount of capital Ackman put behind protecting credit — the actual principal wagered against the market — is unknown.”
The S&P 500 had fallen from an all-time closing high of 3,386.15 on Feb. 19 and to 2,237.40 by March 23.
Ackman defended his fund’s actions in a letter to shareholders this week:
“The idea that my appearance pushed the market down an additional 4% that day is absurd. This is particularly so in light of my disclosure on the show that we were actively buying hotel and restaurant stocks – companies that have been most impacted by the virus – in addition to other companies in our portfolio.
On CNBC, I disclosed my beliefs to the best of my ability. Yes, I got somewhat emotional as I talked about protecting my immune-compromised father from the ravages of the virus. But, I had become bullish because of my belief that the entire country would soon go into lockdown, and that would be the fastest and best way to minimize the impact of the virus. And that was why I explained that we were buying stocks. I also wanted to shout from the rooftops about the importance of taking the virus seriously so that we would build a consensus to lockdown the country as soon as possible.”
Image source: CNBC appearance
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