Bill Ackman's Pershing Square Just Got A Buy Rating From Citi — What's The Howard Hughes Connection?

• Pershing Square announced on Monday that it would invest $900 million in Howard Hughes Holdings by purchasing 9 million shares of the company.
• As part of the deal, Pershing Square will provide HHH with investment, advisory, and other support services to aid its transformation.
• Howard Hughes will also pay Pershing Square a quarterly base fee of $3.75 million, along with a management fee equal to 0.375% of any increase in the company's equity market capitalization above its reference market cap.

Bill Ackman’s Pershing Square Inc. (PS) received a ‘Buy’ rating from analysts at Citi, citing multiple levers available to the investment firm for its bullish outlook.

According to TheFly, Citi initiated its coverage of Pershing Square with a ‘Buy’ rating and a $50 price target, implying a potential upside of over 40% from current levels.

Pershing Square shares were up nearly 1% in Tuesday’s pre-market session.

PS’ Howard Hughes Connection

Citi sees fees from Howard Hughes and new fundraising initiatives as potential catalysts for the shares. The firm added that the company's permanent capital base and high level of recurring fee revenue support the stock’s valuation.

Pershing Square announced on Monday that it would invest $900 million in Howard Hughes Holdings Inc. (HHH) through the purchase of nine million shares of the company.

Ackman has also been named the Executive Chairman of the HHH Board of Directors, and Pershing Square’s Chief Investment Officer, Ryan Israel, will take up the same role at Howard Hughes, the company announced.

As part of the deal, Pershing Square will provide HHH with investment, advisory, and other support services to aid its transformation, including corporate development, transaction execution, and capital markets expertise. The firm will also help identify and hedge macroeconomic risks.

Howard Hughes will also pay Pershing Square a quarterly base fee of $3.75 million, along with a management fee equal to 0.375% of any increase in the company's equity market capitalization above its reference market cap.

Ackman’s Berkshire Ambitions For Howard Hughes

Billionaire investor Ackman outlined his Berkshire Hathaway ambitions for Howard Hughes while raising his bid for the latter.

“We will make available the full resources of Pershing Square to HHH to build a diversified holding company, or one could say, a modern-day Berkshire Hathaway,” Ackman said in a post on X in February this year.

He added that the new HHH will build a portfolio of controlling positions in public and private companies that meet Pershing Square's definition of high-quality businesses.

“Owning small and growing MPCs that will eventually become large cities in the best pro-business markets in the country is a great long-term business.  It's a lot better than a dying textile company,” Ackman added.

During an interview with CNBC on Monday, Ackman also stated that it is highly likely that Pershing Square would build or buy an insurance company for Howard Hughes, mirroring Berkshire Hathaway.

What Are Other Wall Street Analysts Saying About PS?

UBS launched coverage of Pershing Square with a ‘Neutral’ rating and $39 price target. The firm said the company's largely permanent capital structure provides durable fee revenue and supports long-term net asset value (NAV) compounding, but noted that the stock's current valuation already captures much of that benefit.

RBC Capital analyst Kenneth Lee initiated Pershing Square with a ‘Sector Perform’ rating and a $40 price target, praising the company's longstanding investment success and fee-generating business model. Still, Lee believes much of that strength is already reflected in the share price.

Analysts at Wells Fargo see a balanced risk-reward setup for Pershing Square, pointing to fundraising uncertainty and upcoming lock-up expirations as concerns. The firm has a price target of $37 with an ‘Equal Weight’ rating.

PS stock is up 49% year-to-date, while HHH stock is down 20%.

Also See: LUNR Stock Has Gained Nearly 50% In A Month — A Look At What's Behind The Relentless Investor Optimism

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