Hedge fund titan Bill Ackman sounds alarm for another COVID market crash: Billionaire places near-identical trade to one that made him $2.6bn at beginning of pandemic - that companies will default on their debts
Billionaire investor Bill Ackman has placed another massive bet that surging coronavirus cases will drive corporate defaults, similar to his notorious play that garnered some $2.6 billion profit in March.
The hedge fund mogul who heads Pershing Square Capital Management told attendees at a Financial Times conference on Tuesday that markets had once again become too complacent about COVID-19.
He revealed that on Monday, the same day Pfizer announced promising results from a vaccine trial, Pershing had purchased some $8 million worth of insurance that will pay out if companies start defaulting on debt.
That is about 30 percent of the $27 million bet he made on credit-default swaps in the early days of the pandemic, when he famously warned 'hell is coming' and markets crashed as lockdowns swept the nation.
Billionaire investor Bill Ackman has placed another massive bet that coronavirus cases will surge in the US and prompt another round of harsh lockdowns
At Tuesday's conference, Ackman predicted the next few months would be 'a challenging time.'
His bearish bet came on the same day as Pfizer's vaccine news, which he predicted would contribute to a short-term surge in cases if people became complacent about wearing masks before a vaccine is widely distributed.
'I hope we lose money on this next hedge,' Ackman said. 'We're in a treacherous time generally and what's fascinating is the same bet we put on eight months ago is available on the same terms as if there had never been a fire and on the probability that the world is going to be fine.'
Ackman's moves in March boosted Pershing Square massively. The hedge fund is up 44 percent so far this year, having been down 7 percent before the successful bet.
He took Pershing's profits from the credit short on March 23, the day the Dow hit its bottom, and plowed the gains back into equities, benefiting from the subsequent recovery in stock prices.
A year-to-date view of the Dow shows the crash in March and subsequent recovery
Pershing is also sitting on a $4.5 billion blank-check company that is eyeing the acquisition of a 'mature unicorn' which has so far chosen to remain private, Ackman said in a regulatory filing.
Ackman has denied that his prior dire predictions, including his emotional 'hell is coming' interview on CNBC on March 18, were intended to sow fear or send markets into freefall.
The investor's attorneys insist that he did not hide Pershing Square's hedge position from the public before his CNBC interview, and that he engaged in no wrongdoing with respect to his shorts.
'Shortly after the show, I heard that some had interpreted my remarks as being very bearish on the market,' Ackman said in a note to investors in late March.
'The idea that my appearance pushed the market down an additional 4% that day is absurd,' he said.
On March 18, Ackman told CNBC that a 'shutdown was inevitable' and that 'hell is coming'
Ackman has denied claims the interview was designed to help tank the markets, enabling him to hedge his bets and turn a profit
'Yes, I got somewhat emotional as I talked about protecting my immune-compromised father from the ravages of the virus,' Ackman added.
'But, I had become bullish because of my belief that the entire country would soon go into lockdown, and that would be the fastest and best way to minimize the impact of the virus.'
During the impassioned interview with financial cable news channel CNBC, Ackman had urged American business to stop share buybacks and to preserve cash.
'America will end as we know it. I'm sorry to say so, unless we take this option,' he warned.
'We have an invisible, silent, deadly enemy. How do we kill it? Everyone just goes home.'