Friday, October 2, 2015

Can You Believe These FUCKING GUYS?????

Pershing Square put out a hasty press release this morning that hit the wire today at 10:39 am EST, 54 minutes before the AEX closed. Pershing also released a copy of that press release on it's own website at 10:58 am, 37 minutes before the AEX closed. 

The purpose of the release was to notify the public of their change in NAV reporting policies. They quickly scribbled in a sentence to their new policy, AFTER they had already released their NAV numbers under the auspices of the old policy. The new sentence says:
"In the event that month-end falls on a Wednesday, the Company will report the month-end NAV on Thursday, and not report the weeklyTuesday NAV. In the event that Wednesday or Thursday is not a business day, any such month-end NAV will be posted the next business day following that Thursday."
In fact, I have a copy of their original NAV release and you can see for yourself the above sentence is conspicuously absent from last night's report disclosure pictured below.



Pershing continues in today's press release:
"It has come to our attention that certain investors have used our periodic reporting to attempt to determine changes to the portfolio in advance of PSH’s requirement to disclose these changes publicly by comparing their NAV estimates with PSH’s periodically reported results. The ability to determine changes in the portfolio is greater during periods of increased volatility in PSH’s holdings and when PSH’s weekly and monthly performance are reported during the same week, particularly when the NAV reports occur on sequential days.
Until the change in policy, when a month end occurred during a week other than on a Tuesday, investors would receive two NAV performance reports for that week increasing the risk of detection of changes in the portfolio which could be used to front run or otherwise disadvantage PSH."
Ummmm.... NO.

Seriously, WTF are you talking about guys??? First of all, the claim that increased volatility allows one to determine portfolio changes is bullshit. Pershing's desire to maintain large highly concentrated positions is what allows someone to detect changes in their portfolio. The volatility has nothing to do with it except circumstances in which a hugely concentrated position, (i.e. Valeant) is super volatile.

Looking back to the three instances that the monthly came after the weekly report and within the same week there was very little volatility in their NAV. April saw a decrease of $.07 during a two day interval, December 2014 (another dreaded Tuesday/Wednesday combo) saw a $.10 decline, and October 2014 saw a $.31 increase over a three day period. 

What I think Pershing is really trying to say with this press release is that if the shit ever hits the fan on Tuesday again, all bets are off...and P.S. we probably got so freaked we modified our positions to satisfy margin requirments, so heads up everybody. 

Also, PSH trades 6 hours ahead of the underlying equities held in the US by Pershing Square Capital. How could anyone front run or disadvantage Pershing based on PSH's NAV's??? PSH doesn't set it's own trading price, the NAV or the price of it's underlying assets, the market does. Furthermore PSH trades based on a discount applied the underlying NAV/share, so it is reactive to Pershing Square's holdings, it is not determinant. Even if we invented an extreme scenario in which PSH traded 9 hours behind the NYSE, does Pershing truly believe that people are going to run out and buy or short more of the assets held by PSH because the blinded NAV numbers released during NYSE trading hours show a +20% increase, particularly when you can see in real time what those assets are trading at??? If you observed a +20% NAV increase from one period to the next without seeing the corresponding increase in the underlying holdings, you'd immediately know that you have absolutely NO IDEA what the new position responsible for that +20% increase is because it would have to be new. Throw a dart maybe? It's a completely nonsensical circular argument they are trying to stroke everybody with.

If anything, Pershing's policy change frontruns and disadvantages holders of PSH by not accurately reporting the value underlying the vehicle as promised because they made this change retrospectively. Had they reported as they should have with the notification that NEXT week/month the policy was going to change it wouldn't be an issue. I think it's more likely that the Pershing Square press release and NAV reporting changes is reactive to a huge drop in NAV on Tuesday that Pershing Square would have embarrassingly reported on Thursday, which would have caused a precipitous decline in PSH's price today, had they not attempted to sweep it under the rug.  Sure, PSH would have recovered on Monday because they would have issued the monthly numbers tonight, with the slighly improved results.

Adding to this obfuscation, is the manner in which Pershing handled the change. They put out numbers with improper disclosure, and allowed buyers/sellers/borrowers in their market for 7 hours 41 minutes before retrospectively correcting their sleight with a nonsensical explanation less than an hour before the AEX market closed. 

Well done you fucking guys! Well done.

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