Billionaire investor Bill Ackman’s hedge fund, Pershing Square Capital, is planning to buy Universal Music Group (UMG), the world’s largest music company, which represents artists including Taylor Swift, Bad Bunny, Bob Dylan, and the Beatles.
Ackman, a self-described “Buffett devotee,” is following in his idol’s footsteps by attempting to acquire UMG. The IPO and joint listing with UMG would help Pershing gain access to “permanent capital,” a key part of Buffett’s investing playbook. Investors can pull their money out of a hedge fund quarterly or annually, requiring fund managers to keep cash on hand and putting them at risk of having to sell their holdings. After the IPO, Pershing would have access to capital in its closed-end fund that can’t be directly revoked; investors have to sell their shares on the open market instead.
Buffett, who has freely shared his investing advice for decades, is best known for one recommendation: “Be greedy when others are fearful and fearful when others are greedy.”
With this deal, it appears Ackman could be following that advice. Before the announcement, UMG’s stock, which is traded on the Euronext Amsterdam exchange, was down about 22% year to date. Today the stock is trading at 19.06 euros ($22.06), up about 2 euros ($2.32).
Pershing laid out what it sees as UMG’s weaknesses in the pitch’s announcement, explaining that the postponement of listing the company on a U.S. exchange, underutilization of the company’s balance sheet, and poor investor relations and communications are reasons for the company’s “underperformance.”
“Some of the highest quality businesses in the world are trading at extremely cheap prices,” Ackman wrote in the post. “Ignore the MSM [mainstream media]. One of the most one-sided wars in history that will end well for the U.S. and the world. And we have the potential for a large peace dividend.”
Ackman’s play for UMG requires the faith of the company’s investors, something he has fallen short of in the past. He was unable to convince Pershing’s own investors to back the company’s $25 billion IPO goal in 2024 after a series of errors. Ackman downplayed the IPO risks to investors and argued that the company could achieve a “sustained premium” to its net asset value, defying the fund’s regulatory prospectus.
With the hedge fund’s latest attempt, Ackman has tempered his expectations and is aiming to raise between $5 billion and $10 billion. He has changed his approach by trying to list both the closed-end fund and Pershing’s parent company. To encourage investors, every 100 shares of the closed fund they buy will automatically grant them 20 free shares of Pershing Square Capital Management.
“It is a very good day for my psychological short on Herbalife,” Ackman wrote in a post on X six years after the dispute. “And it is an even better day for the world to see one of the biggest pyramid schemes fail.”
