Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to Bloomberg's coverage of the Global Milk and Conference.
Speaker 2: I'm Danny Berger alongside Bill Ackman, the founder and CEO
Speaker 2: of Pershing Square. Bill, thank you so much for sitting down.
Speaker 2: Of course, I mean, you got to be the most
Speaker 2: busy man on Wall Street right now. It's just compiling
Speaker 2: a list of what you're currently working on. You have
Speaker 2: two publicly traded equity funds now, a publicly traded asset manager,
Speaker 2: a publicly traded real estate company that you're working into
Speaker 2: transforming a mini Berkshire Hathaway, and you're running a campaign
Speaker 2: with Universal Music Group. Where's your attention most focused on
Speaker 2: right now?
Speaker 1: I'm investing. They're all related, They're all correlated.
Speaker 3: They're all part of one very small portfolio, which is
Speaker 3: why it's possible.
Speaker 2: It is possible. And I know you run with a
Speaker 2: slim team there, so it's always impressive. And you got
Speaker 2: this IPO out last week and we talked about it,
Speaker 2: but we talked before it started to trade. I know
Speaker 2: you don't concern yourself with a day's worth a trader
Speaker 2: or a few days, but what do you make of
Speaker 2: the reception? That it got, that it did fall considerably.
Speaker 2: Is this an issue with bankers mispricing it?
Speaker 3: No, I mean we sold a pile of cash. I
Speaker 3: don't know why anyone would buy a pile of cash
Speaker 3: and then the next day sell it at a discount.
Speaker 3: What I think I didn't appreciate when we last spoke
Speaker 3: is we did something different in this offering that people
Speaker 3: don't normally do. Normally, retail investors get kind of a
Speaker 3: very small allocation and they're disappointed by the shares they
Speaker 3: get in an IPO. In our case, we give the
Speaker 3: retail investors what they asked for and we cut the
Speaker 3: institutions back. And I think the impact of that was
Speaker 3: retail investors woke up with more shares than they had
Speaker 3: intended to buy, and we're put in kind of a
Speaker 3: forced selling position, and that has to work its way through.
Speaker 3: I think once that's done, I mean, now again, the
Speaker 3: package of securities is modestly down from where we where
Speaker 3: we priced the offering. Remember, you get an interest in
Speaker 3: a TSUS, which is then either I think of it
Speaker 3: as investment holding company, you could think it was a
Speaker 3: clothed in fund. There you're getting forty nine dollars in
Speaker 3: cash that we're in the process of deploying in the market.
Speaker 3: Then to get an interest in our business, which is
Speaker 3: a very good business. It's a bit like a Blackstone
Speaker 3: or a KQR, but some important differences. Substantially, all of
Speaker 3: our assets are in these sort of permanent capital vehicles,
Speaker 3: and so the business model itself is like owning a
Speaker 3: royalty on compounding and as we so that's why I
Speaker 3: all have to do is focus on generating returns. I
Speaker 3: generate returns that generates an increase in our assets, that
Speaker 3: generates more cash flow.
Speaker 1: For the business.
Speaker 3: And it's a bit of a self fulfilling prophecy as
Speaker 3: long as we do a good job allocating the money.
Speaker 2: One of the things that's different and I kind of
Speaker 2: hinted this at the beginning from you from the other
Speaker 2: big publicly traded asset managers, is just how slim you are.
Speaker 2: And this was brought up actually in one analysis of
Speaker 2: Persian square.
Speaker 1: I like being slim. I think we all do.
Speaker 2: I think, especially in this day and age. But this
Speaker 2: idea that there is key man risks because so much
Speaker 2: of it is your ideas and your ability.
Speaker 1: To try to raise it's not true.
Speaker 2: So yeah, so talk about that. How do you mitigate it?
Speaker 3: I actually think we have the least key man risk
Speaker 3: of any hedge fund in the world. And that sounds
Speaker 3: surprising because usually you put me on. I do more
Speaker 3: TV appearances than other Persian Square employees. But what causes
Speaker 3: a hedge fund to go out of business is something
Speaker 3: happens to a key person and then investors. The first
Speaker 3: thing they do is they ask for their money back,
Speaker 3: and then they asset shrink and the rest of the
Speaker 3: team leaves. In our case, the assets are in these
Speaker 3: public corporations where the money can't leave, and so if
Speaker 3: something happened to me, the money stays, the asset state
Speaker 3: of the team stays. The team owns, you know, forty
Speaker 3: five percent of the business, right, so the company of
Speaker 3: equities widely spread throughout the firm. And it's unusually about
Speaker 3: our firm. In an industry where's a lot of turnover,
Speaker 3: there hasn't been a persect Square. So my CEO, Ryan Israel,
Speaker 3: and I we've work together now seventeen years. He's been
Speaker 3: CIO for almost four. You know, if I disappeared tomorrow,
Speaker 3: nothing would really change. In the early days of Persian Square,
Speaker 3: I generated most of the ideas, and I work with
Speaker 3: analysts on analyzing those ideas. Today I'm generating a minority
Speaker 3: of the ideas, so I'm not saying I'm unimportant. Hopefully
Speaker 3: I can still, you know, generate value for the firm.
Speaker 3: But the firm itself is very robust. You know, it's
Speaker 3: the only firm in the world that if something happened
Speaker 3: to all of the employees because the ass or forever,
Speaker 3: the board would just hire a new team or put
Speaker 3: the assets in an index fund and you'd still build
Speaker 3: a very valuable kind of business over time. So it's
Speaker 3: one of the most robust businesses in the world, and
Speaker 3: it's one of the highest quality businesses in the world.
Speaker 2: By the way, just just kind of on a similar notice,
Speaker 2: as you know a Warren Buffett fan. This past weekend
Speaker 2: was the first Berkshire Hathaway Annual meeting, where Abel was
Speaker 2: at the helm. You're obviously a young man, but have
Speaker 2: you thought it all about setting up succession what that
Speaker 2: eventually looks like at Pershing, Well, I.
Speaker 3: Think it's really effectively set up, you know, identified as
Speaker 3: CEO Ryan, as I mentioned, he's really leading the investment
Speaker 3: team at this point. Ben Haakim president of the firm.
Speaker 3: He kind of runs everything other than the investment side
Speaker 3: and the operation. It's amazing there's anything for me to do.
Speaker 3: I have the privilege of thinking about big ideas, and
Speaker 3: you know, occasionally a big idea drive some value.
Speaker 2: Can we talk about one of those big ideas in
Speaker 2: Universal Music Group. You come forward with an offer to
Speaker 2: buy this company, and a lot of people scratch their heads.
Speaker 2: Why would you do this with the company that has
Speaker 2: very large majority shareholders where it's tough to put through.
Speaker 2: What is the game plan?
Speaker 3: Actually the the game plan there is absolutely we need
Speaker 3: the support of Boulay Group, but what we're proposing, I
Speaker 3: think is very much aligned with what they're interested in.
Speaker 3: I mean, Universal is sort of a interesting case of
Speaker 3: a company that's.
Speaker 1: Done well in its core business. Right.
Speaker 3: Universal remains the dominant company in the recorded music industry.
Speaker 3: They remain very close to being the number one company
Speaker 3: the music publishing industry. It's done a very good job
Speaker 3: with that. But they've not sort of graduated from being
Speaker 3: operating like a private company into being a public company,
Speaker 3: and they've lost i would say, the confidence of kind
Speaker 3: of the shareholders in the analyst community, which is why
Speaker 3: the stock. You know, the business value has grown and
Speaker 3: the multiple that people assigned to the earnings of the
Speaker 3: company has de cliented, and the result is a stock
Speaker 3: that trades at the same price that traded. You know,
Speaker 3: the company first day of trading was twenty five euros,
Speaker 3: and this is in September of twenty one. Here we
Speaker 3: are almost five years later that the stock is nineteen
Speaker 3: euros eighteen euros. So that's not a good performance. The
Speaker 3: company really needs a reset. It's also listed really in
Speaker 3: the wrong exchange. It's really a US company. So our
Speaker 3: transaction moves the com company from Amsterdam to a US listing.
Speaker 3: That alone is meaningfully value creating. We kind of recast
Speaker 3: the balance sheet. The company has unmonetized assets on the
Speaker 3: balance sheet, their stake in Spotify, and now notably, the
Speaker 3: company announced in the last couple of days that they're
Speaker 3: going to sell half their interest in Spotify. We think
Speaker 3: they should sell the balance The company announced a more
Speaker 3: aggressive buyback program. We think there's an opportunity to do more.
Speaker 3: But our transaction effectively enables a cancelation of about seventeen
Speaker 3: percent of the outstanding shares, a migration of the company. Here,
Speaker 3: a new board of the directors, led by Mike Ovitz.
Speaker 3: You know, Mike, I've known a very long time. I
Speaker 3: think it can be a very value added value operate
Speaker 3: to the operations of the company and then just a
Speaker 3: better a program in terms of how the company communicates
Speaker 3: with shareholders. You know, the company right now is sort
Speaker 3: of analyzing the proposal. We'll hear back from them soon.
Speaker 3: We've been engaged with the option the big shareholders.
Speaker 2: And you're hopeful that they will be receptive to this.
Speaker 1: I mean, the company has to do something.
Speaker 3: This is a very good solution to the various issues that.
Speaker 1: Confront the company.
Speaker 2: By the way, on this idea of European versus US exchanges,
Speaker 2: it feels like that is something that a lot of
Speaker 2: companies see that they can unlock that they move to
Speaker 2: a US exchange on the day we talk. For example,
Speaker 2: I have the ASTROSENICACFO and they did something similar. Does
Speaker 2: Europe have a real.
Speaker 3: Problem, Bill, I mean yes, Look, the exchanges are natural monopolies.
Speaker 3: And you know, if you today, if you're not listed
Speaker 3: in a market which has the most demand your stock,
Speaker 3: your cost of capital is going to be higher than
Speaker 3: should be. And so they're sort of and I think,
Speaker 3: you know, Europe has too many exchanges. The what if
Speaker 3: I were in charge of Europe, I would consolidate the
Speaker 3: London Stock Exchange. Your next kind of bring the various exchanges,
Speaker 3: because again it's a natural monopoly and you want the
Speaker 3: maximum liquidity and demand in one in one place. But
Speaker 3: they're sort of nationalism, I think prevents that.
Speaker 2: One of the kind of newer features of markets is
Speaker 2: the prevalence and the explosion of betting markets. And there's
Speaker 2: this real criticism that we're seeing almost a casinoification of
Speaker 2: the world where you can bet on anything. They're ETFs
Speaker 2: listing this week, where you can bet on whether the
Speaker 2: Dems or the Republicans are going to be winning the
Speaker 2: House or the Senate. Is it a problem? Does this
Speaker 2: concern you at all? This trend?
Speaker 3: I think the negative is that there's a positive and negative.
Speaker 3: I think the negative is it's not the most productive
Speaker 3: activity in the world. And there is a lot of
Speaker 3: gambling that goes on, whether it's sports betting or otherwise,
Speaker 3: and there are people and particularly young people, you know,
Speaker 3: losing money they can't afford to lose betting on the
Speaker 3: outcome of things that are difficult to predict. So that's
Speaker 3: the obviously the unfortunate. It's been like a lottery tickets,
Speaker 3: you know, it's it's a net loss I think for society.
Speaker 3: On the positive side, what betting markets allow is they
Speaker 3: allow people.
Speaker 1: To hedge risks that they're exposed to.
Speaker 3: It also creates information, you know, you know, looking at
Speaker 3: where things are priced. You know, the betting markets have
Speaker 3: done a better job of predicting outcomes or elections.
Speaker 2: Some could say because maybe not elections, but there's more
Speaker 2: insider trading that incentives exist for that to happen.
Speaker 1: Yeah.
Speaker 3: Look, the people make arguments that the insider trading should
Speaker 3: not be illegal because that would bring a sort of
Speaker 3: more transparently one of those people, I believe that I'm not,
Speaker 3: but you can make some markments for it. So I
Speaker 3: think it's it's sort of interesting. But you know, the
Speaker 3: more the market becomes casino like, I think the risk
Speaker 3: the risk is I guess people get they withdraw capital
Speaker 3: because they lose confidence, right, and you know, I think
Speaker 3: markets are going more and more short term. And if
Speaker 3: you think about what a stock market is, it's these
Speaker 3: are very long term assets. So the short termism drives liquidity,
Speaker 3: which I think on the margin is a positive, but
Speaker 3: it also can lead to short termism in the way
Speaker 3: businesses are run well.
Speaker 2: I would love to just leave on the note of
Speaker 2: your hometown city, New York. There's been a lot of
Speaker 2: discussion about Mayor Mom Donnie making very public pronouncements against
Speaker 2: specific people, against Ken Griffin, announcing a pie to tear
Speaker 2: a tax, directly attacking some of the business leaders of
Speaker 2: this city. I know you were concerned heading into this
Speaker 2: election and the outcome of it too. How are you
Speaker 2: feeling now?
Speaker 1: Not great about things?
Speaker 3: I think Bondammi is not If your goal is to
Speaker 3: make New York City kind of financially solvent, what you
Speaker 3: don't want to do is drive out the Ken Griffins
Speaker 3: of the world. Right, Ken brings very valuable business. That's
Speaker 3: you know, it's a six billion dollar project which will
Speaker 3: generate you know, thousands of construction jobs, architecture jobs, marketing jobs,
Speaker 3: make your list employees who will pay material amounts of
Speaker 3: taxes because they're highly compensated employees.
Speaker 1: And it's that.
Speaker 3: It's sort of the the Wall Street and the tax
Speaker 3: revenues from Wall Street are what enable New York City.
Speaker 3: Kind of all the people in New York City to
Speaker 3: have a better life, and if you drive out the
Speaker 3: Ken Griffins of the world, who notably you know, has
Speaker 3: made a major contribution to New York not just from
Speaker 3: bringing his business there, but he's been very philanthropic. If
Speaker 3: a four hundred million dollar donation to Morris lom Kettering,
Speaker 3: which is an institution that doesn't just help New York,
Speaker 3: is to help people with cancer all over the world
Speaker 3: to go to get treated there. So it's just not
Speaker 3: it's not a very smart approach the way.
Speaker 2: I can't think about person to square with out thinking
Speaker 2: about New York City. But could you ever see yourself
Speaker 2: being driven out.
Speaker 1: Of New York I think it's unlikely.
Speaker 3: I'm more of the Ghana guy to fight to make
Speaker 3: sure New York City is a great city than someone.
Speaker 1: Who's going to lead.
Speaker 2: The problem is, though, that with these policies, even if
Speaker 2: they have dire economic consequences, Gandhani is incredibly popular and
Speaker 2: he's still very popular with his base. So how do
Speaker 2: things change then? How do you fight this tide if
Speaker 2: there still is this broad based popular support for these
Speaker 2: types of ideas.
Speaker 1: It's an issue.
Speaker 3: I mean, I think the answer is a better can
Speaker 3: thing who you know. Look, where Mandami was correct is
Speaker 3: that New York is not a very affordable place to live.
Speaker 3: But you're not going to make it more affordable, like
Speaker 3: getting rid of.
Speaker 1: The biggest drivers of tax revenues for the city.
Speaker 3: Mandami already has a budget crisis, but we got to
Speaker 3: figure out how to run New York City much more efficiently.
Speaker 3: But when you raise taxes, you know, and the most
Speaker 3: mobile people, frankly are the ken Grifvenths of the world.
Speaker 3: Can can choose to locate his business wherever he wants,
Speaker 3: and he can locate his Jetta wherever he wants.
Speaker 2: Very true, though, we are heading into midterms and again
Speaker 2: affordabilities on the ticket and that's pushed a lot of
Speaker 2: people left. Are you worried about how this shakes out,
Speaker 2: that we might get more candidates who want to put
Speaker 2: forward these types of ideas into economic policy.
Speaker 1: Yeah.
Speaker 3: Look, I think you look at a country like Argentina
Speaker 3: and how far it fell right one of the most.
Speaker 1: Argentina GDP whatever.
Speaker 3: One hundred years ago, it was one of the most
Speaker 3: significant countries in the world and fell off the map
Speaker 3: because of socialism and other bad policies. Nice Malay coming
Speaker 3: back in the country dramatically recovering. It's sort of a
Speaker 3: great example, and it's crazy to me that socialist ideas
Speaker 3: can travel into a country like this one.
Speaker 2: I have only about thirty seconds, but I've we were remiss
Speaker 2: if I didn't ask about some of the work that
Speaker 2: you've been doing trying to make for a one case,
Speaker 2: those types of investment vehicles more broadly accessible. We had
Speaker 2: an executive action last week. What are you pushing for
Speaker 2: at this moment?
Speaker 3: I think every American has to own a piece of capitalism.
Speaker 3: And when you do, you're excited when the stock market
Speaker 3: goes up and it allows you know, power of compounding,
Speaker 3: allows you to save for your retirement. You know, we
Speaker 3: you know, unfortunately, wages cannot compound as fast as stock market,
Speaker 3: and so I think it's very important for every American
Speaker 3: to participate in capitalism or or we'll end up in socialism.
Speaker 3: And that's so I think the President's plan is a
Speaker 3: great one. You know, you have to be able to
Speaker 3: you know, I think if you believe that you're gonna
Speaker 3: be able to retire comfortably, maybe even leave something for
Speaker 3: your kids so they got a head start. You know,
Speaker 3: that makes you believe in the country, and if you can,
Speaker 3: it makes you angry.
Speaker 1: So I think a very important program.
Speaker 2: We're going to have to end it there. Thank you
Speaker 2: so much for joining, really appreciate your time with that
Speaker 2: will toss it back to New York. That is, of course,
Speaker 2: Bill Ackman, the founder and CEO of Pursing Square,