Sometimes a company’s shares increase just because an important person has invested in it. This just happened to Zoetis, an animal health company, whose stock surged 9% after word leaked that the activist investor Bill Ackman had bought a large chunk of the company’s stock.
No matter how many laws and regulations exist to prevent stock manipulations, no matter how hard the SEC works, when someone as wealthy and influential as Ackman makes a move it sends ripples through the world of finance.
Imagine if Warren Buffet were to short a certain stock. His decision would send all of the company in question’s investors running scared and dumping their stock causing its value to plummet. After all, everyone knows that Warren Buffet always knows what he is doing. As a result, by shorting the stock Buffet, or any other high profile investor, fulfilled his own prophecy and did so within the law.
Also think of what would happen to the value of Microsoft stock should Bill Gates choose to sell all of his shares in it.
Ackman himself shorted Herbalife and has been working to destroy that company because he feels that it is nothing more than a Ponzi scheme.
Zoetis discovers, develops, manufactures and commercializes a diverse portfolio of animal health medicines and vaccines designed to meet the real-world needs of veterinarians and the livestock farmers and companion animal owners they support.
Bill Ackman’s Pershing Square and one of his protégés, Scott Ferguson, have reportedly acquired a 10% stake in it. Pershing Square alone took 8.5% of the company for a $1.5 billion position.
The news was enough to send the company’s stock soaring to $43.72 a share on Tuesday.
The billionaire investor recently commented that, “Zoetis, 80% durable, and you know, we think a very good business. Now its animal health, market assigns a slightly lower multiple. About 19 times earnings. But we think these are sort of relevant healthcare businesses that have some analogous percentages of durable product.”
The Wall Street Journal has reported that Ackman may try to get Zoetis to sell itself to Valient Pharmaceuticals, another company in which he has a significant interest.
Zoetis was spun off by its former parent company Pfizer.