This Man Made Billions from Coronavirus Crash But He Might Get in Trouble for It
A lot of investors are currently dealing with the aftermath of the coronavirus panic’s impact on the stock market. Both small and large investors just saw the value of their portfolio practically decimated as share prices continue to fall. However, one billionaire seems to not be as affected by this black swan phenomenon. In fact, his hedge fund management company actually posted gains amidst the market meltdown.
Gains Amidst Losses
Bill Ackman’s Pershing Square reportedly recorded a net gain of 11.1% last March after it made bets anticipating the coronavirus pandemic’s negative impact on the stock market. He did this by spending $27 million on credit default swaps on high-yield indexes in February. While the virus was well into infecting thousands of people around the world already, it wasn’t seen as the threat it is now.
The decision proved to be a wise one as those hedges have reportedly grown to have a value of $2.6 billion in just a couple of weeks. It also offset the company’s losses on its equity portfolio. What more, Pershing Square’s net asset value increased by 10% going from $25.19 per share to $27.72.
However, this act didn’t go unnoticed and uncriticized by market watchers and economic experts, who have since accused the 53-year-old investor of manipulating the market in his favor. These comments point to Ackman’s ‘emotional’ interview with CNBC where he warned people of the possibility of industries collapsing and the economy entering a deep recession.
He has since defended himself from these speculations explaining that he has always been open about his company’s hedges and buying equities. Ackman expressed his rebuttal both in a Twitter thread and a more formal letter to investors.
Whether or not Ackman played a hand in the economy’s downfall, one thing’s for sure: a recession is already here. Experts seem to have a consensus that the United States has entered a recession about 12 years after the Great Recession in 2008. What’s even more concerning is that some experts admit that they won’t be able to tell how long it will last and how bad it will affect the country. The situation has been described as society sacrificing the economy to prioritize public health.
The United States has reportedly overtaken China and Italy for having the most number of coronavirus cases. The global toll has breached a million confirmed infections.
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