Howard Hughes Holdings Stock Fluctuates as Bill Ackman Adjusts His Strategy to Build a Modern Berkshire Hathaway

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Billionaire investor Bill Ackman makes waves with a revised acquisition proposal for Howard Hughes Holdings / Reuters


Howard Hughes Holdings experienced significant fluctuations in its stock price as billionaire investor Bill Ackman indicated plans for a major announcement, prompting a surge in shares on Tuesday. Ackman’s hedge fund, Pershing Square, has increased its takeover bid for Howard Hughes to $90 per share, up from the previous offer of $85 made in January. The excitement surrounding this announcement saw Howard Hughes shares close 6.8% higher at $80.60 before a subsequent decline of 4.6% in after-hours trading. Currently, Howard Hughes boasts a market capitalization of approximately $4 billion.

For months, Ackman has pursued Howard Hughes with aspirations of establishing a new version of Berkshire Hathaway. The original Berkshire Hathaway was a struggling textile company when Warren Buffett acquired it in 1965. Ackman’s inspiration from Buffett is evident in his recent communications, where he expressed a desire to replicate Buffett’s success in building a diversified holding company with an exceptional long-term performance record. In a post on X, he shared his ambition of creating a similar enterprise, noting that he began his investment journey with a modest hedge fund at the age of 26.

Pershing Square’s revised proposal includes plans to acquire 10 million newly issued shares of Howard Hughes at the increased price of $90 each. The initial offer in January also involved purchasing 11.8 million shares from non-Pershing Square affiliated shareholders. Should the latest proposal succeed, Ackman would assume the roles of chairman and CEO of Howard Hughes, steering the company towards becoming a contemporary Berkshire Hathaway, acquiring controlling stakes in operational businesses.

Howard Hughes confirmed receipt of this latest offer in a press release and stated that it is currently reviewing the unsolicited proposal. This is not Ackman’s first attempt to emulate Buffett’s approach; in 2015, he described his investment in Valeant Pharmaceuticals as akin to investing in an early-stage Berkshire Hathaway, though he ultimately divested at a considerable loss in 2017.

The abrupt changes in Howard Hughes' share price indicate that investor sentiment may not fully align with Pershing Square's latest offer. Analysts from Piper Sandler noted that the revised bid falls short of Howard Hughes' net asset value of $118 per share. The response to Ackman’s previous Berkshire Hathaway vision was lukewarm, suggesting that existing shareholders may be reluctant to accept an acquisition at a valuation perceived as lower than the company's worth. While the stock saw a 9.5% increase following Pershing Square's initial proposal in January, it has since lost some of those gains, with a year-to-date increase of 4.8%.

Market experts, including Piper Sandler analysts, opined that Pershing Square's latest offer for Howard Hughes lacks appeal for the real estate company's shareholders. They indicated that the independent board of Howard Hughes might not approve the revised proposal, especially since the company does not require the proposed capital injection of $900 million. A more enticing $100 per share all-cash offer could yield a more favorable reception from investors.

John Kim, a real estate analyst at BMO Capital Markets, pointed out that the new proposal raises several unanswered questions regarding investment strategy and future trading dynamics. As the potential for a more diversified entity looms, there remains uncertainty about how Howard Hughes would operate with enhanced resources under new management. Piper Sandler's analysts emphasized that Howard Hughes shareholders are in a strong position and still have time as discussions evolve, suggesting that Pershing Square will continue exploring different avenues to gain traction with the company.

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