Bill Ackman Defends CNBC Interview After $2.6 Billion Profit From Credit Hedge Stokes Criticism

The Billionaire investor said it was "absurd" to think his televised comments pushed markets lower, noting his CDS hedge had paid off before his CNBC interview.
Publish date:

Bill Ackman defended a controversial television appearance Friday after it emerged that his Pershing Square Capital hedge fund made a $2.6 billion profit on bets against the credit markets while warning that 'hell is coming' from the coronavirus pandemic. 

Ackman, who implored President Donald Trump to "shut down the country for the next 30 days and close the borders" on March 18, was invited onto CNBC later that day to expand upon that view as the coronavirus pandemic began to accelerate throughout north America. 

In an emotional interview with CNBC's Scott Wapner , the billionaire investor cautioned that Boeing Co.  (BA) - Get Report may not survive if it didn't get government bailout support, predicted that Hilton Worldwide  (HLT) - Get Report is "going to zero ... along with every other hotel company in the world" and warned that "as many as a million Americans are going to die." 

The S&P 500 fell 5.18% on March 18, the day of Ackman's appearance, with losses accelerating as his comments were broadcast. 

"The idea that my appearance pushed the market down an additional 4% that day is absurd," Ackman said in a letter to investors Friday. "This is particularly so in light of my disclosure on the show that we were actively buying hotel and restaurant stocks – companies that have been most impacted by the virus – in addition to other companies in our portfolio."

Ackman had, in fact, indicated that he was "buying on the way down" and insisted that he was in fact bullish on the overall stock market given its recent declines, although he did not specifically disclose a significant position in credit default swaps, an esoteric corner of the market that allows investors to bet on default sentiment linked to corporate bonds.

"My bullish posture and my statements on CNBC and Twitter were strongly supportive of the markets," Ackman said. "I made those statements at the time we were buying stocks and reducing our short in the credit markets. My statements were therefore totally consistent with how we were trading. We had turned bullish and we were in the process of investing about $2.5 billion in equities."

Ackman added, as well that the $2.6 billion earned from his credit default swap hedge had already been realized by the time he appeared on CNBC, although he said a large portion of it was unwound in the days that followed.

"The bottom line is that our hedging strategy worked," Ackman said. "While we incurred mark-to-market losses on our portfolio equal to $2.6 billion, we made the same amount on the hedges. Notably, as of our last public report released yesterday, we were flat for the year."