Bill Ackman: evaluation

Transcript context

…I would love to hear it as well. But it was really my deciding to wind up my former fund. And we owned a big stake in a company called Hallwood Realty Partners, which was a company that owned real estate assets and it was worth a lot more than where it was trading, but it needed an activist to really unlock the value. And we were in fact of going out of business and didn’t have the time or the resources to pursue it. So I sold it to Carl Icahn, and I sold it to him at a premium to where the stock was trading. I think the stock was like 66. I sold it to him for 80, but it was worth about 150. And I said, look… And part of the deal was Carl’s like, look, I’ll give you schmuck insurance. I’ll make you sure you don’t look bad. And I had another deal at a higher price without schmuck insurance, but a deal with Carl at a lower price with schmuck insurance. And the way the schmuck insurance went, he said, “Look, Bill, if I sell the stock in the next three years for a higher price, I’ll give you 50% of my profit. ” That’s a pretty good deal. So we made that deal, and because I was dealing with Carl Icahn who had a reputation for being difficult, I was very focused on the agreement and we didn’t want him to be able to be cute. So the agreement said, if he sells or otherwise transfers his shares. And we came up with a definition to include every version of sell, okay, because it’s Carl. Well, he then buys the stake and then makes a bid for the company and plan is for him to get the company. And he bids like 120 a share, and the company hires Morgan Stanley to sell itself, and he raises bid to 125 and then 130, and eventually gets sold, I don’t remember the exact price, let’s say $145 a share. And Carl’s not the winning bidder, and he sells his stock or he loses or transfers his shares for $145 a share. So he owes actually our investors the difference between 145 and 80 times 50%. And I had… Lawyers never like you to put a arithmetic example. I put a formula out of a math book in the documents so there can be no confusion. It was only an eight page, really simple agreement. So the deal closes and he’s supposed to pay us in two business days or three business days. I wait a few business days, no money comes in. I call Carl. I’m like, “Carl, congratulations on the Hallwood Realty.” “Thanks Bill.” I said, “Carl, just I want to remind you, I know it’s been a few years, but we have this agreement. Remember the schmuck insurance?” He’s like, “Yeah.” And I said, “Well, you owe us our schmuck insurance.” He said, “What do you mean? I didn’t sell my shares.” And I said, “Do you still have the shares?” He says, “No.” I said, “What happened to them?” “Well, the company did a merger for cash and they took away my shares, but I didn’t sell them. Do you understand what happened?” And I said, “Carl, I’m going to have to sue you.” He said, “Sue me. I’m going to sue you,” he says. ger for cash and they took away my shares, but I didn’t sell them. Do you understand what happened?” And I said, “Carl, I’m going to have to sue you.” He said, “Sue me. I’m going to sue you,” he says. So I sued him and the legal system in America can take some time. And what he would do is we sued and then we won in the whatever New York Supreme Court, and then he appealed, and you can appeal six months after the case. He waited till the 179th day, and then he would appeal. And then we fought at the next level, and then he would appeal. And he appealed all the way to the Supreme Court. Of course, the Supreme Court wouldn’t take the case. It took years. Now, as part of our agreement, we got 9% interest on the money that he owed us. So I viewed it as my Carl Icahn money market account with a much higher interest rate. And eventually I won.…

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