A US hedge fund has made well over $ 2 billion in a one-time bet that the coronavirus epidemic will cause the global market to crash – and less than a week after its boss said hell was coming.
Pershing Square Capital Management’s hedge fund manager Bill Ackman wrote on his company’s website that his business had made $ 2.6 billion out of an initial $ 27 million expense, the pandemic would wreak havoc on the market.
The huge comeback came just a week after Ackman said “hell is coming” for US companies.
His company captured the turmoil in the bond market during the Covid-19 crisis, buying “credit protection on various high-quality, high-yield credit indices worldwide.”
Bill Ackman (photo) co-founded another company, Gotham Partners, before starting Pershing Square Capital Management in 2004
The bet, which was designed to protect Pershing Square Capital Management from the stock market downturn triggered by Covid-19, saw its business make nearly 100 times its initial investment of $ 27 million.
The company finalized the transaction on March 23.
Ackman went on Twitter on March 18 to advise US President Donald Trump to “close the country for the next 30 days and close the borders” because of Covid-19.
He also asked for 30-day rent, interest, and tax “vacation” for all US citizens.
Adding: “Stopping is inevitable because it is already happening, but not in a controlled manner, which increases economic pain and amplifies the spread of the virus.
“With an exponential composition, every day we postpone the closure costs thousands, and soon hundreds of thousands, then millions of lives, and destroys the economy. “
Ackman also appeared on CNBC on March 18, advising US companies to stop share buybacks and preserve cash, predicting “hell is coming.”
Sorry scenes – Wall Street in New York is almost empty in the middle of the Covid-19 epidemic
He warned that the hotel and services industry would be compromised by market turmoil and that Boeing “will not survive” without a government bailout.
Later that day, he clarified his remarks by stating, “Some investors were confused by the comments.
“To clarify, I am confident that the president will do the right thing by temporarily closing the country and closing the borders. If that happens, we can win the war against the virus and the markets and the economy will fly away.
But Pershing Square started to change tack when the U.S. government adopted a $ 2 billion economic stimulus package, which has now been passed by the Senate.
He rolled out the bets in the market tumbling on March 23, just five days after Ackman gave his warning.
Pershing Square then began to use the money it earned to buy shares in various companies, including the Hilton hotel chain and the Starbucks coffee franchise.
She also bought shares in Berkshire Hathaway.
Bill Ackman is often called upon to speak publicly about the financial markets. His recent bet of $ 27 million could be one of the most lucrative of all time, if confirmed
In an online article on Wednesday, Ackman wrote: “We got more and more positive in the equity and credit markets last week, and started the process of unwinding our hedges and redeploying our capital in companies we love at bargain prices built to withstand this crisis, and which we believe will flourish in the long term. “
Pershing Square’s trade profit could be one of the most lucrative of all time, if confirmed.
Pershing Square had lost money in the first two months of 2020, according to information published by The Guardian.
The US $ 2 trillion stimulus bill has now been passed by the US Senate and is being finalized by legislators in Congress.
In addition to helping Main Street businesses, hard-hit airlines, US manufacturing companies and others, the Americans could receive $ 1,200 each.
Married couples could receive $ 2,400 from the bill, and American parents could get $ 500 for each child under the age of 17.