Activist Investor: Ackman Vs. Target

"Activist Investor" Eric Jackson publishes commentary every Wednesday. Please bookmark TheStreet.com and check back each week for more analysis of shareholder rights issues or click here for an RSS feed.

The much-anticipated annual meeting of retailer Target(TGT Quote) is Thursday and large shareholder Bill Ackman of Pershing Square has been in a long-running battle for the past several weeks to win five seats on the board.

Ackman has spent $10 million to $15 million of his own money on his campaign thus far. Although he's won over the support of two influential proxy advisory firms -- RiskMetrics and Proxy Governance -- he faces a daunting task in winning Thursday's vote. In its latest issue, Barron's magazine proclaimed that Ackman's campaign was "off-target," stating that "Ackman's initiative could be one of the worst-conceived efforts in recent years by an activist investor."

On Tuesday, Ackman pledged to retain his stake in Target for at least five years if he's elected to the company's board. He said his personal stake in Target is now worth more than $55 million.

Here's my view on the campaign.

A Review of the Fight

Ackman's Pershing Square has been a shareholder in Target for more than two years. In 2007, he opened Pershing Square IV, which was a fund solely dedicated to investing in Target. Pershing's funds own 3% of the stock outright with options to purchase at least another 2%, many of which are already in-the-money.

From very early on in his stock ownership of Target, Ackman has been an outspoken critic of the company. His calls for the company to unlock value in its real estate holdings date back to at least 2007.

Earlier this year, Ackman apologized to investors in Pershing Square IV after his option bets on Target had gone against him resulting in a drop in fund performance of 89.5% as of the end of January. Target management has used Ackman's option holdings to imply that he's more a short-termist than other investors and that his proposed changes are riskier.