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I mean, one thing that we'll know that we can look at to return to normal is dealmaking, is fundraising. That'll be a sign that people feel comfortable, companies feel comfortable with the current market environment. And it looks like at least one person feels good about how things are shaping up. Bill Ackman has filed to take public his hedge fund firm, Pershing Square and a new closed end fund at the same time. Billy Lipschultz is Bloomberg News
a senior equities reporter. He's been covering IPOs for years, and this is something we had been anticipating, Billy, because there was this effort to list the hedge fund, Pershing Square back in twenty twenty four that didn't get very far well.
So back in twenty four, the initial thought process from our understanding from Perching Square was we're going to raise a lot of money in a closed end fund, so that way we can have an even higher feebase. We want to raise more than twenty billion dollars. Then that number became like ten, then it became five. Then it didn't actually get off the ground. So that was for
the closed end fund. Now we're seeing them come back with this i'll call a novel pitch that if you invest in the closed end fund, we'll give you some shares to the actual management company. As a way to entice people to buy. Their pitch was, you know, we had a few billion dollars in demand last time. We now have two point eight billion dollars in private demand.
As long as we can bridge the app to more than five billion dollars in this closed end fund ups our fees and also gives us something else to give investors, and it ultimately takes the company public.
So it's fee. What's the motivated here is it fees?
It's creating a vehicle. Well, it goes back to kind of the pitch that I'm.
Just trying to assess whether or not like this is a sign of healthy markets and it's a good move.
It's something that they need to do. So point blank, Pershing Square failed to raise a handful of billions of dollars in a closed end fund two years ago.
He's not coming at this from a position of strength, or is he? I know, I'm really pressing.
I mean maybe, Okay, things that we know they wanted to raise tens of billions of dollars before they did not, they had discussed potentially taking.
The management company public.
Now with this process both can happen. Potentially raising five to ten billion dollars increases the amount of fees that the company can generate the management company, and it takes the management company public.
A lot of people know Bill Ackman as an activist investor. They think of Herbal Life, they think of all these other companies that he kind of targeted, made his case against, or made his case four.
He no longer really does that, does he.
No, it's pretty much holding a handful of companies. So whether it's Toole or Alphabet Brookfield like kind of buying a concentrated portfolio and holding it.
He's also now even.
Like Warren Buffett, kind of using that playbook.
That's exactly what he's trying to lean into. Though a bit more vocal on social media with his views, which depending who you talk to, is bullish or bearish, but really trying to cater with this offering to retail investors.
Point Blake is kind of the view of this pitch.
So now he's going to listen to retail investors, and you know, right.
He engages with them. Though he does engage, he shares a lot of things on social media.
I'm just still trying to wrap my head of why he'd want to go public with anything and then be open to so much more scrutiny and regulation or whatever.
Well, I think that's kind of the discussion going back to twenty twenty four when they sold a stake in the company Perching Proper, that was viewed as a way.
To start the process to going public.
So there was always a vision to ipoing or taking public the management company in some capacity. And it does benefit by if you're a management company and you're collecting a two percent management fee. The more assets you have under management, the more fees you have, the more attractive the company does.
Then. So what's the timeline now, are.
So base case at a bare minimum, you need fifteen days from this filing before you can launch an IPO process takes about a week or so.
When you look at the calendar.
Two and a half weeks from now you get closer to some of the holidays, So maybe this is something that we see starts to hit the road after the Easter holiday when people are back in their seats. But at a minimum, this process cannot formally start for at least fifteen days and then we'll move from there, but we're expecting it probably just looking at the calendar.
Call it right on the other side of April, okay.
Ageain, and I mean some sign of confidence from Bill Ackman that he's moving forward with this in a period where there's a lot of uncertainty about acid prices, about the global economy, and.
That's something that they kind of call out in his eight page line let are basically saying that you know, most of the time companies who are looking at ipoing will not go when there's volatility in the market. Their pitches well, if you're giving us money to turn around and invest, well, we should be buying low and then ultimately profiting from there.
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Coles they had results. In fact, they reported worse than expected sales for the last quarter. They continue to struggle to revive years of declining sales. Let's figure out the cold story this morning. Mary Ross Gilbert, senior equity analysts with BI covering retail. We actually may just did an informal survey in the studio. Charlie Pellett the last time he was in at Coles was ten years years ago.
Scarlet ten twelve years ago.
Yeah, okay me. Actually I do go there, but probably about six months ago. Who is Coal's customer, I mean clearly not us.
So, John. The Cole's customer is largely a low to middle income consumer. And I just went there yesterday just to see what the store look like. And I did observe that their customers are definitely seeking value. You don't always see a lot of bags because they're in there carefully choosing, trying to find value. And so this is why the company has brought on deal bars. Those are
ten dollars and under items. And now they've announced that they're also bringing in toy bars, so they want to also feature items again ten dollars an under with different price points of like four ninety nine, five ninety nine, et cetera. So they're really trying to gain you know, traffic and conversion. But really they're also leaning into their private brands. So for example, I did observe that Els
Louren Conrad, which is their women's label. It's a really a fun label and they did a great presentation in the store yesterday. The problem is that the rest of the store is still it's not really cohesive, so we don't really not there in terms of where we need to be where you can see a real cohesive strategy. And we saw a lot of clearance in the stores as well, so they still have a road ahead, as you highlighted with the four years of stacked comparable sales declines.
Yeah, that's quite a track record to have to turn around. Mary.
According to a company presentation at the earnings, Coles admitted that it lost competitive ground during high traffic shopping windows including Black Friday, Cyber Monday, and the week falling Christmas. When I read that, I thought that that was a fairly startling admission. How do you interpret that.
I wasn't so prize candidly because we were there on Black Friday, and I could see that shoppers were trying to spend because you get sort of a free the minute you walk in the door. You get a free Coal's cash and you scratch it to figure out how much cash you get, and trying to find a way to spend it was a challenge because there were a number of excluded items and while they've increased the number of brands that are not excluded, they're still a fair amount.
So there was some confusion and not a lot of customers were walking out with bags, is what we observed. So we we felt like, you know, it was hard pressed, let's say, to find find a way to spend the money. So they really needed to do a better job, and that's what they admitted on finding values, and that's why they say that their margins this year, you know, are going to be hard pressed because they need to get
the sales lift right. They've done such a great job on managing expenses and they'll continue to do so, but until they get the sales moving in the right direction, they're not really going to see that margin improved. Because they do have to be more promotional, have sharper values, and so that's going to impact margin to a certain extent. But it's important so that they can be competitive because we saw strong results in off price. As you note.
You could hear me early this morning going ouch as I filled up the car. Was when did I say three sixty a gallon? Did that come up in the call with the executives?
Good question.
I mean, it's probably the last thing they need for their customers to be paying lots more for other stuff.
John, You're absolutely right, and this customer is really going paycheck to paycheck, and so when you do have gas prices going up, that's going to impact their discretionary income. And that's the importance that they really have those those sharp values in the store. So that's what they're hoping to achieve. They're really leaning into their private brand and they've got a campaign buy Coals, which features their brands like so for juniors, and that actually did well because
they really featured that heavily in the stores. We observed it yesterday and so you know, I think and that also helps on the margin side to a certain extent. But again, you know, they really need overall sales to rise, to really get margins to move in the right direction.
This is a company, as you pointed out, has been struggling for about four years with same store sales, you know, not performing very well. You just look at the sales growth over the last couple of years and it's a bunch of negative numbers starting from twenty twenty three on. What is needed here to really change the trajectory of Coals?
I mean, how much longer can it go in this same direction before it becomes a candidate for takeover by another company or by private equity, or I mean something needs to change perhaps, But yeah, you raise.
A valid point because when you think about it, they do have a juicy real estate portfolio said that might be attractive to some strategic buyers potentially, so there could be some interest here. We also think that with over eleven hundred stores, do they really need to be operating that many stores. They did say on the call that they have no plans to close or open any stores. Really. They might have a replacement store here or there, but their objective is really to get this box more productive
and also raise digital sales. They really want to take advantage and grow digital sales too, So it's really about reaching a point of stability on the top line. And so there are, like I said, leaning into private brands and they have a number of initiatives, but it's going to take time. So they're already guiding toward comparable sales declines of about one to three percent in the first quarter.
And when you look at this stacked four year comp decline they're going against or cycling, that's a seventeen percent decline. So that shows you the magnitude of the decline. And that's even after gaining a two billion dollar revenue business with Sofa. So that means that when you look at the declines and the rest of the business, it's much steeper than the seventeen percent, and so that's a critical
thing to note. And when you think about Sofa, their comp sales were flat in the quarter previously, we are seeing increases, so that business is really matured at this point and that's why they've got a number of initiatives there, bringing in more brands to really ignite and try to grow that business.
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You know, when we look at all the volatility in the markets, it's kind of striking how much investors have to juggle in terms of the different factors out there, and you know, the narratives that they need to contend with.
What do we call it the confluence?
Confluence, that's a great word. Matt Griffin knows the confluence very well. Matthew Griffin is our Bloomberg Equities reporter and he's one of the authors of today's Big Take story, which is about how market cracks are widening as war, AI and credit fears are colliding all at once.
Matthew, great to see.
You, Scarlett, great to be on Thanks for having me so.
The war and Iran just introduces a new shock into the global economy, one that already has investors feeling kind of nervous, kind of confused, certainly, very uncertain about all the different things that are taking place, whether it's inflation, whether it is the jobs market, whether it's AI or private credit.
Yes, and what I would say about this is that it really means two things for market right now. One is, even if the war ends tomorrow, even if oil prices go back down into the sixties per barrel, it's not all clear for investors in the way that maybe you think about last spring Trump paused the tariffs, you have the best day for the S and P five hundred since two thousand and eight because a lot of the
headwinds facing markets just vanish. That's not true now when you have private credit concerns, when you have fears of AI disruption. And then another thing is that the war also heightens some of those other risks. It makes it harder to refinance loans, private credit loans that aren't working. If central banks can't cut rates, it puts more pressure on consumers. So it all just adds up to a really tough spot for Wall Street right now.
So what's the playbook.
Well, what the head of US rates at Ameravet told us is the playbook is out the door. And I know that maybe isn't a definite answer, but I think everyone is scrambling to figure out what to do here. You know one thing that I you know, heard from an investor myself is diversification is really important because there's just a lot that isn't working right now, so you want to make sure you you know, have some exposure to things that do. But I don't think there is a right answer.
One of the final quotes you have in the story is pretty telling. It's for Matt Maley, who talks about how a lot of people are not so so concerned because they say, yeah, okay, oil is spiking, but it's not as bad as it was in the nineteen seventies. You know, Okay, there might be a bit of some lofty valuations in tech, but it's nothing like two thousand. All these comparisons to previous context kind of give give us a false sense of complacency, doesn't it.
Yes, And it comes back to the idea of the story. So Matt Malee's a strategist at Miller Tabic. What he says is you can look at each of these risks on its own because the you know, the problems together can add up to create you know, issues for risk assets. And also that the stock market is really expensive today, so that maybe creates more downside risk even if the initial you know issues are smaller.
So if a headline crossed and said the do wars over? Is it all back to normal?
I think that's what we've been hearing is not necessarily you know, I have talked to investors and strategists for a different story last week that was about this question of will Trump and can Trump step in to rescue the markets in the way that he did last spring?
And Trump put?
Is that?
Trump put yes?
And what a lot of people told me is they really weren't holding their breath for two reasons. One, the market hasn't been shaken as badly as it has been last spring, so the administration and may not be at that point yet. Although you did see Trump, you know, making some comments yesterday signaling the word will end. But the more profound issue is that a war is not as simple to change as a list of tariff rates on a poster board.
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