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Welcome. I'm Manita Huja, editor at large at Forbes and founder of Iconoclast, and I'm thrilled to be joined by legendary hedge fund manager Bill Ackman, CEO, founder of Pershing Square Capital Management, recently filed a $5 billion IPO. Bill, thank you so much for joining us.
So, Bill, as we mentioned, four days ago, you rang the opening bell. You filed your IPO. Tell us, you put more capital in on day two. Tell us about that experience and how it's doing.
So, the New York Stock Exchange puts on a good a nice little celebration, which is a lot of fun. And it's the very beginning of what it will be a very long-term story. I mean, it's 22 years in that we're taking our company public. So basically this offering is the IPO or the listing of the management company the general partner a bit like the Blackstone or Apollo business model and then a new it's really our first US listed investment company where you have $43 you can buy a share stock and be an investor with us on the best terms we've ever offered to investors. So we're kind of excited to have the potential for millions of shareholders over time.
And so I've known you a long time and I know that you're somebody of conviction right? So in day two, you doubled down and put more capital into the fund. Tell me what some of the feedback has also been from some of your investors and the excitement around that.
I mean, sure. So one, we don't view this as yes, it's a responsibility having other people's money, but we are by far the largest investors in the investment entity. The management team has about $500 million invested in this new entity and our goal is to grow it at a very nice rate over a long period of time. And the people that we've tried to recruit to the IPO are ones that for the most part are in this for the very long term.
So my goal was to make this a very favorable outcome for every person right and so we did something almost backwards what they do in IPOs which is normally the big institutions get the preferable allocations and the little guy might get 10 cents on the dollar. We said I'm going to give every retail investor a full allocation to the transaction because I want to favor the up-and-comer.
So, if someone asked for 10,000 shares, they actually want a thousand. Well, I gave them 10,000. So they found themselves at 1:55 p.m. on Wednesday with about 10 times as many shares they wanted. And so that led to the last few days of the trading of the closed end fund not ideal. It's trading at about a 14% discount to the cash we have sitting in the till of the company. Well that is an opportunity for someone coming in today which is you can buy cash at a discount and over time I expect we can compound at a very nice rate and we all know that following an IPO in the couple days after it opens is not really a predictor of long-term success.
Absolutely not. And actually, this IPO is different. Most investors depending on when you came in, if you were in the cornerstone round, you're ahead of the game because we gave you an interest in the management company. So this was an IPO of this investment fund and you got a piece of the general partner for free. Kind of a gift with purchase.
The package today is worth a few percent less than the IPO price, but I still think it's going to be a very good long-term investment, and I think both companies will do very well over time. So, as I said earlier, Bill, I've known you a really long time. We've had you on the cover of Forbes. We called you Baby Buffett. Warren Buffett has been somebody that's inspired your investment philosophy since day one. And you've called Buffett's evolution your blueprint, partnerships into permanent capital. Now you have Pershing Square, Inc. trading on the NY and Howard Hughes being rebuilt into modern-day Berkshire with Vantage. Two compounding engines, both yours. How do they fit together?
Sure. So the core strategy of Pershing Square has always been buying minority stakes in pretty big companies and helping make them more successful. So that's Pershing Square USA and that's our offshore fund Pershing Square Holdings. Pershing Square Inc. is the company that receives fees from the funds we manage. And then Howard Hughes is the entity that's really modeled after when you put me on the cover of Forbes the subtitle was something like Howard Hughes will become our version of a baby Berkshire. Well we're finally taking Forbes's idea and putting it into practice. So Howard Hughes is a very interesting business that owns these small cities. We own all the residential land, most vast majority of commercial land, and many of the income producing assets in the woodlands for example or Summerland in Las Vegas and we have a condominium business which we build condominiums on the beach in Hawaii. It's a bit of an unusual public company more the kind of company you normally see owned by a family. It's a private enterprise. It's not really caught Wall Street's attention except after you wrote that cover article when people thought it would be the next Berkshire. Now we're actually going to build an entity modeled after what Buffett did over time. So we're taking the real estate company, which itself kind of liquidates over time. We're selling land to home builders. We generate several hundred million a year doing that. We generate cash from real estate income producing assets we own. And we sell condominiums. We've got about $4 billion of condominiums that are under contract that will be sold over the next several years. Instead of redeploying that cash into real estate, we're buying an insurance company. You mentioned Vantage. That transaction should close in the next month or so. And we're going to manage Vantage much the same way Buffett has managed his insurance businesses where he's taken a very cautious approach to the insurance that he writes. He's taken a very cautious approach to the float generated by that insurance basically in treasuries and then he's taken the surplus of the insurer, invested in common stocks. We're going to follow that same path and the goal is to build a compounding vehicle that's something that you can put away for the next 50 years and turns into a big and valuable company over time. That's the plan. So Howard Hughes will buy companies. Will invest in insurance but will be a controlling shareholder of those companies. So much smaller scale. And the Pershing Square funds will invest in big companies but we'll buy a small stake.
Which is the bigger story? The Pershing Square fund?
Uh, I think they'll both do very well over time. Yeah. I love all my children.
Of course. Of course. So, Vantage, if we just double click on that for a minute. That's a $2 billion specialty insurance platform. Real float, as you said, real underwriting. When did insurance click for you as an answer? Was there a moment that the model really the timing seemed right and resonated?
So, one, I've obviously followed Buffett over time. I've been a careful reader of the Berkshire reports. But we have been debating what to do with Howard Hughes for a while. Do we keep it as a dedicated real estate company? Do we take it private? It just doesn't work as a public company. The biggest problem of the company, I would say, is that the market's cost of capital for a real estate development and land ownership company is too high. And so you can't in order for a stock to go up, you got to earn a return in excess of your cost of capital. The cost of capital is too high. So we either have to take it private or we have to transform the business. And I read a book called the Complete Financial History of Berkshire Hathaway. It's only for geeks who like Buffett. But it really tells the story of Berkshire and it becomes very clear how insurance was disproportionately huge to the value creation. And we thought let's just follow that same path here instead of starting out with a textile operation. Berkshire was a textile business and not a particularly good one, but over time it generated a lot of cash that Buffett redeployed into higher returning businesses. We're starting out with a real estate operation that by its very nature kind of self-liquidates. Instead of reinvesting all that cash in real estate, we're going to make investments in real estate that make sense for these communities, but we still will have excess cash. We take that capital and we're going to invest in insurance, and that's what we'll build over time.
So, Bill, you're known to be one of the most celebrated and high-profile activist investors of our generation, but 38% of your portfolio right now is in Alphabet, Amazon, and Meta. Why do you believe these magnificent legacy names remain the safest and most undervalued way to play in the AI revolution? I know it's something that you spoke about earlier today.
They're businesses that we've admired for a long time, but they were never cheap enough for us or we at least missed the opportunities when they had moments of cheapness. But I think the market has reacted very negatively to the very large capital expenditures that these companies have committed to when they're approaching hundreds of billions of dollars and I guess investors are concerned about whether they'll earn adequate returns on these investments. I would say we don't share that concern at all. One, the valuations of the companies have come down significantly and that meanwhile their growth rates are accelerating and that's what really creates an opportunity. We have confidence in the management teams here when they say that they're earning very attractive returns on these investments. It makes sense to us. It's not clear which frontier model is going to be the winner or whether there will be a winner. Open AI was kind of in the lead and then we had Google and then Anthropic seems to be kind of in the lead. But one thing's clear, all of these companies require massive amounts of compute. And the cloud is the most scalable, safest place to get access to that kind of compute. And that explains certainly the Amazon story and Google story.
I want to go off script a bit and ask you because I think it'll be a very interesting answer. What do you use personally? Are you an OpenAI guy? Are you a Claude guy? Are you a Gemini?
Grok in part because I was a small investor in xAI and I'm a X person. So Grok is very convenient and also it's super current because a lot of the training data is from X. Claude I've also used. We have the enterprise cloud model at work. We actually have most of the models at work but I tend to default to Claude or Grok.
And do you feel like it helps you? Do you use it more in your personal day-to-day or do you use it as an investor too for both?
Yeah. I want to learn about a topic.
Another big topic obviously is Universal Music. You guys put forward it's one of your largest positions. Owner of the world's most valuable music catalog from Taylor Swift to the Beatles. You recently made a proposal that would boost Pershing's stake in the company, would redomicile it in the US, and you board members at a moment where AI is reshaping every creative industry. What makes UMG the right bet?
