Pershing Square and the man that calls the activist firm's shots, William Ackman, have been big shareholders of discount retailer Target (NYSE:TGT), and have been aggressively agitating for change in recent months. In fact, Pershing Square had been busy trying to sell shareholders on its slate of board nominees.
However, at the end of last month shareholders applied the brakes to Ackman's push as they reelected incumbents. But is Ackman entirely out of this game and is the heat off the existing board?
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Pershing Square is No Slouch
In late May, the Associated Press indicated that Pershing Square owned more than 7% of the stock. That's a pretty large stake and something that shouldn't be ignored. Of course, what Ackman and Pershing do with the holdings from here is unknown. That said, if he decides to hold on, it could continue to be a thorn in management's side. The mere fact that Ackman is engaged in any way is a large motivator for its board of directors and senior managers. Keep in mind that Pershing Square has earned a reputation as a firm that agitates for change.
For example, several years ago the firm made headlines as it pushed McDonalds (NYSE:MCD) to repurchase shares. Pershing Square also, according to reports, wanted fast-food burger chain Wendy's (NYSE:WEN) to spin-off the popular Canadian doughnut chain, Tim Horton's (NYSE:THI). Today, Tim Horton's is a publicly-traded company. Put simply, Ackman shouldn't be counted out and, he could potentially take an aggressive stance again. This possibility should keep the Target board sharp and working to make sure that the existing common base is happy with its efforts.
What Might Cause Pershing to Act as an Activist Again in Target?
If Target's stock price fails to pick up from the high $30 range to the low $40 range, and remains well off its 52-week high of $59.55, Ackman may again be the center of attention at some point. Another reason Ackman might act like an activist (in Target): If its same-store-sales disappoint consistently, or it fails to impress The Street in some fashion consistently over time. Just for the record, note that it reported a 6.1% same-store drop in May. That was a bigger drop than expected. (For more, see Analyzing Retail Stocks.)
The Bottom Line
Ackman may have lost the most recent battle, but there are certain things that could potentially happen that could lead the company and Pershing to clash heads again at some point. (To learn more, check out The Industry Handbook: The Retailing Industry.)
