Ackman Bets Big on Howard Hughes with $1B Stock Proposal

Bill Ackman doubles down on Howard Hughes, proposing a $1B stock acquisition. Despite a modest 35% return since 2010, Ackman remains bullish as he eyes a long-term hold and believes in significant upside potential.

Date: 19-01-2025

AI Rating: 6

Stock Performance Analysis

Bill Ackman and Pershing Square Capital Management are advocating for Howard Hughes Holdings (NYSE: HHH), though the stock's performance over a lengthy period has been lackluster. With a modest return of only 35% since 2010, the compound annual gain stands at just 2.2%—indicative of historically poor performance. The recent proposal to buy 11.7 million shares at $85 per share, representing a notable premium, aims to revive the company's stock value and capitalize on its estimated value of $118 per share.

Proposed Transaction Details

The proposed transaction involves a significant purchase of shares, alongside a $500 million share repurchase program. By increasing its stake to between 61.1% to 69.2% of outstanding shares, Ackman aims to exert greater influence and possibly redirect Howard Hughes into more lucrative opportunities. Shareholder options provided, whether to take cash or roll their position, highlight a strategic move designed to streamline ownership and focus on long-term growth potential.

Valuation Considerations

Management of Howard Hughes believes the market has undervalued the company, advocating for a sum-of-the-parts analysis that significantly supports the notion of a higher stock value. The recent spin-off of less core assets showcases Howard Hughes' strategy to become a focused real estate company, specializing in Master Planned Communities (MPCs). This transformation could signal improved future profitability and appeal to investors.

Long-term Outlook

Ackman's commitment to holding Howard Hughes indefinitely indicates a strong belief in the company's substantial potential. His stated intention to treat this investment as a permanent holding suggests confidence in the inherent value of Howard Hughes's assets and future growth prospects. Investors should monitor the company's response to this strategic plan closely.

Stocks: HHH