Hedge fund billionaire Bill Ackman is the poster child for what is wrong on Wall Street. He has made large amounts of money for himself and his investors by price gouging consumers who purchase drugs. He’s even waged a war on a company, which serves communities that employ scores of middle and low income Americans.
Bill Ackman has proclaimed himself an “activist investor,” moving markets to “do good.” In reality, however, he is a charlatan who is not a progressive at all. He has used his hedge fund, Pershing Square Management, to increase already high prescription drug prices for profit.
Antoine Gara wrote for Forbes on April 27, 2016:
Fresh off one of the biggest Wall Street drubbings in recent memory, Valeant Pharmaceuticals went to Washington on Wednesday to defend itself against accusations the company is little more than a price-gouging, drug industry hedge fund.
J. Michael Pearson, the architect of Valeant’s rise into a stock market darling, and his biggest booster, billionaire hedge fund manager Bill Ackman, testified in front of a Senate committee investigating its drug pricing practices. Former CFO Howard Schiller, who was Valeant’s finance head until he was fired in March, also testified.
Senator Claire McCaskill (D-Missouri) argued, “Valeant is the company that perfected this model of strategic acquisitions and price hikes that made it Wall Street’s dream come true… That is not social good. That is social bad.” Ackman has about a $4 billion investment in the company and he claimed that he did not know that after he acquired the company, Valeant raised the prices of all the drugs they acquired. A great way to make money is to purchase prescription drugs and then hiking prices, because that is the best and easiest way to rob customers of money.
The business model he used was to buy up competitors to establish a monopoly position, then hike prices through the roof. Also, they cut research and development investments showing that this was a short-term investment to make as much as they could in a short period of time before the company ran out of new products to market. These are not actions taken by a progressive activist Wall Street investor – they are the actions of a thief.
Ackman’s war on the company Herbalife is another example of activist investing gone bad. In December of 2012, Pershing Square took out a $1 billion short bet that the company Herbalife would go bankrupt. Per Herbalife’s web site, the company employs 8,200 people worldwide and had net sales of health care products of $4.5 billion in 2015. The company has been around for over 36 years, and yet here comes Bill Ackman’s hedge fund to bet on the company going belly up and its thousands of employees going into the unemployment rolls.
Roger Parloff reported in Fortune on September 9, 2015 that Ackman lives the life of a king and seems to not be sharing his bountiful wealth with the people he purports to be helping:
We spoke at his offices on the 42nd floor of a midtown building that offers panoramic views of Central Park. Just to the east is the residential tower where he recently bought a $92.5 million penthouse duplex. It’s just an investment, he has said, because he considers it undervalued. In the corner of the conference room stands a striking memento: a rocket-powered ejection seat that once accommodated the pilot of a Canberra nuclear strike bomber of the 1950s. It evokes a crucial skill for a hedge fund manager: knowing when to bail.
The Fortune story documents Ackman using his connections in Washington to push for an investigation of the company. He was successful in initiating an investigation that, in the end, exonerated the company of being what Ackman alleged – an illegally organized company. He went as far as hiring a mole for millions working in the company to be a whistleblower and to help take the company down. Ackman has failed so far to date and has lost tons of money on that bad bet.
When billionaire hedge fund managers make believe they are progressive activist heroes while enriching themselves by gouging people in need of prescription drugs and a job, they are exposed as being charlatans.
And that is what Bill Ackman is – a progressive charlatan.