Pershing Square Holdings, Ltd. Public Class USD Accum.Shs · LSE:PSH
Pershing Square Holdings, Ltd. Public Class USD Accum.Shs — Pershing Square Holdings — Investor Presentation (February 2022)
68 slides from Pershing Square Holdings, Ltd. Public Class USD Accum.Shs's investor presentation, Feb 11, 2022
Slide 1: Annual Investor Presentation
Annual Investor Presentation February 11, 2022
Slide 2: Disclaimer
Disclaimer All information provided herein is for informational purposes only and should not be deemed as a recommendation to buy or sell any security mentioned. Pershing Square Capital Management, L.P. (“Pershing Square”) believes this presentation contains a balanced presentation of the performanc
Slide 3: Agenda
Agenda Chairman’s Introduction 2021 PSH Performance Review Business Update Organizational Update Portfolio Update Q&A
Slide 4: Chairman's Introduction
Chairman’s Introduction
Slide 5: Board of Directors of PSH
Board of Directors of PSH All directors are independent of Manager other than Nicholas Botta Board Director Summary Experience ‾ Director BlueRiver Acquisition Corp. Anne Farlow ‾ Former Director Investec Asset Management Independent Director Chairman of the Board ‾ Former Partner, Providence Equity
Slide 6: PSH Board Process
PSH Board Process Quarterly meetings; additional meetings as needed Review and Monitor Investment performance and portfolio Operational risk management Investor relations Share price performance Expenses Regulatory matters Board Committees (membership limited to independent directo
Slide 7: PSH Board Additional Matters Considered in 2021
PSH Board Additional Matters Considered in 2021 COVID impact on portfolio and operations of investment manager Interest rate hedge position Pershing Square Tontine Holdings, Ltd. (NYSE:PSTH) Universal Music Group Bond issuances and debt strategy Strategies for addressing discount to NAV
Slide 8: Overview of 2021 Performance
Overview of 2021 Performance 2021 was a strong year for PSH with NAV appreciation of 26.9% and a total shareholder return of 18.6% Annualized Returns Market Indices HFRX Indices PSH S&P FTSE MSCI Equity (1) (2) Period NAV Share Price 500 100 World Activist Hedge (2) 2021 26.9% 18.6% 28.7% 17.4% 22.3
Slide 9: 2021 Corporate Actions: New Bond Issuances
2021 Corporate Actions: New Bond Issuances In 2021, PSH completed two new bond issuances of $1.3 billion and redeemed $369 million of debt due in 2022 PSH Capital Structure ($ in mm) 2/8/2022 Total Capital $13,476 Coupon Maturity Issue Date 2022 Bonds (Public Offering) $631 5.500% Jul-2022 Jun-2015
Slide 10: PSH Total Debt to Total Assets Ratio
PSH Total Debt to Total Assets Ratio In periods of market and/or portfolio volatility, PSH has continuously maintained conservative leverage levels and investment grade ratings Total Debt to Total Assets Ratio | 6/30/2015 to 2/8/2022: 10/1/21: Issued $700mm of 3.250%, 10- 10/4/21: Redeemed $369mm of
Slide 11: Long-Term Debt Financing Strategy
Long-Term Debt Financing Strategy Our ability to access low-cost, investment grade, long-term debt is an important competitive advantage for PSH ✓ PSH has attractive credit characteristics Simple, transparent and highly liquid investment portfolio Significant asset coverage: PSH debt is covered
Slide 12: Strategies to Address the Discount
Strategies to Address the Discount Strong investment performance Compound annual net returns above 50% for the last three years Marketing Inclusion of PSH in the FTSE 100 index in December 2020 AIC reclassification from Hedge Funds to US Equity Portfolio transparent and easy to value E
Slide 13: 2021 Performance Review
2021 Performance Review
Slide 14: 2021 Performance Ahead of Most Market Indices
2021 Performance Ahead of Most Market Indices 1 2021 Return: PSH Net of Fees vs. Indices Total Return 28.7% 26.9% 22.3% 19.8% 17.4% 12.1% PSH S&P 500 FTSE MSCI HFRX HFRX Equity 100(1) World Activist Hedge Index(2) Index(2) Reflects returns from 12/31/20 through 12/31/21, including dividend reinvestm
Slide 15: Substantial Three-Year Outperformance
Substantial Three-Year Outperformance 3 Year Compound Annual Return: PSH Net of Fees vs. Indices Total Return 1 50.1% 26.0% 22.3% 17.7% 9.3% 9.1% PSH S&P 500 FTSE MSCI HFRX HFRX Equity 100(1) World Activist Hedge Index(2) Index(2) Reflects returns from 12/31/18 through 12/31/21, including dividend r
Slide 16: PSLP / PSH Annual Net Returns
Pershing Square L.P. (“PSLP”) / PSH Annual Net Returns Annual Net Returns Year S&P 500 PSLP / PSH 2004 10.9% 42.6% 2005 4.9% 39.9% 2006 15.8% 22.5% 2007 5.5% 22.0% 2008 (37.0%) (13.0%) PSLP 2009 26.5% 40.6% 2010 15.1% 29.7% 2011 2.1% (1.1%) 2012 16.0% 13.3% 2013 32.4% 9.6% 2014 13.7% 40.4% 2015 1.4%
Slide 17: PSLP / PSH Cumulative Net Returns Since Inception
PSLP / PSH Cumulative Net Returns Since Inception PSLP / PSH Net Returns vs. S&P 500 through December 31, 2021 PSLP / PSH: 1,800% 1,709% Launch of PSH December 31, 2012 1,600% 1,400% 1,200% 1,000% 800% 600% S&P 500: 514% 400% 200% 0% (200%) Data represents returns an investor would have earned by in
Slide 18: 2021 Contributors (Gross Returns)
2021 Contributors (Gross Returns) Contributors PSH Lowe's 10.8% Universal Music Group 8.7% Interest Rate Swaptions 7.7% Hilton Worldwide 5.7% Domino's Pizza 4.2% Chipotle Mexican Grill 3.9% Agilent Technologies 3.8% Howard Hughes Corporation 2.3% Total Contributors 47.1% Past performance is not a gu
Slide 19: 2021 Detractors (Gross Returns)
2021 Detractors (Gross Returns) Detractors PSH Pershing Square Tontine Holdings (6.5%) Fannie Mae & Freddie Mac (4.0%) Index CDS (1.1%) All Other Positions (0.3%) Total Detractors - Underlying Portfolio (11.9%) (1) Bond Interest Expense (1.3%) Total Detractors - incl. Interest Expense (13.2%) Past p
Slide 20: Strategy Has Proven Defensive in Down Markets
Pershing Square’s Strategy Has Proven to be Defensive in Down Markets PSLP / PSH Average Monthly Net Returns vs. S&P 500 through December 31, 2021 Average Monthly Average Return in Average Return in Return Up Months Down Months 4.0% 2.9% 3.0% 3.0% 2.0% 1.5% 0.9% 1.0% 0.0% (1.0%) (2.0%) (1.7%) (3.0%)
Slide 21: Total Assets Under Management and Skin in the Game
Total Assets Under Management and Skin in the Game AUM(1) Insider Capital As of 2/8/2022 ($ in millions) Total Equity Total % of Equity Pershing Square Holdings ("PSH") $13,476 $10,474 $2,625 25% Pershing Square, L.P. ("PSLP") 1,377 1,377 648 47% Pershing Square International ("PSI") 586 586 217 37%
Slide 22: Business Update
Business Update
Slide 23: 2021 Key Developments
2021 Key Developments 2021 was another strong year for the funds driven by new investments, existing portfolio holdings, and our hedging strategy ✓ Purchased 10% of Universal Music Group (“UMG”) for $4 billion(1) prior to its separation from Vivendi ✓ Continued to seek merger partner for Pershing Sq
Slide 24: Universal Music Group: Overview
Universal Music Group (“UMG”): Overview World’s leading music company #1 global market share (32%) in recorded music, > 3mm song portfolio #2 global market share (23%) in music publishing, 180k songwriter portfolio Ticker: UMG Irreplaceable owned intellectual property and must-have content M
Slide 25: Universal Music Group: Investment Thesis
Universal Music Group: Investment Thesis UMG is a high-quality business with a decades-long runway for revenue and earnings growth Attractive business model Capital-light, rapidly growing royalty on greater global consumption and monetization of music Double-digit revenue growth outlook Massive
Slide 26: UMG Share Price Performance Since IPO
UMG Share Price Performance Since IPO UMG’s share price including dividends increased 37% from our average cost at inception to December 31, 2021, and has decreased 14% year-to-date in 2022(1) UMG share price performance from 9/21/2021 to 2/8/2022: 12/20/21: UMG removed € 28 9/21/21: UMG completes f
Slide 27: Pershing Square Tontine Holdings (PSTH)
Pershing Square Tontine Holdings (“PSTH”) We remain disciplined in seeking a potential transaction for PSTH that meets our core investment principles Pershing Square assumed PSTH’s obligations to Vivendi Completed the purchase of UMG shares ahead of schedule and on original terms Preserved Per
Slide 28: Pershing Square SPARC Holdings (SPARC)
Pershing Square SPARC Holdings (“SPARC”) While seeking a transaction for PSTH, we are simultaneously looking to improve its structure with the launch of SPARC SPARC seeks to improve upon PSTH’s structure ✓ Investors opt-in to the initial business combination (“IBC”) ✓ Reduced opportunity cost with n
Slide 29: SPARC: Overview of Key Terms
SPARC: Overview of Key Terms SPARC will distribute SPARs to both PSTH shareholders and warrantholders 1 SPAR per share of Class A Common Stock of PSTH (200,000,000) 2 SPARs per outstanding Distributable Redeemable Warrant (44,444,444) SPARC will have a flexible exercise price $10.00 initia
Slide 30: SPARC: Key Events to Date
SPARC: Key Events to Date The distribution, listing and trading of SPARs require SEC approval of SPARC’s registration statement and a new NYSE listing rule June 25 SPARC confidentially files its registration statement with the SEC August 24 NYSE files for initial rule change to allow listing of subs
Slide 31: PSTH Price Performance Since IPO
PSTH Price Performance Since IPO Including pro-rata distributed warrants, PSTH declined 31% in 2021, and has increased 1% year-to-date in 2022(1) PSTH price performance from 7/21/2020 to 2/8/2022: $36 7/21/20: PSTH prices IPO at 6/4/21: PSTH confirms 7/19/21: PSTH’s board of $34 $20.00 per unit. Eac
Slide 32: Portfolio Developments
Portfolio Developments Since the beginning of 2021, we initiated four new investments and exited two highly successful investments Initiated Positions 2021 2022 Undisclosed Position Exited Positions Capital Invested Realized Value at Exit Position Cumulative Return(1) ($ mm) ($ mm) $609 $1,103 81% $
Slide 33: Pershing Square's Core Hedging Principles
Pershing Square’s Core Hedging Principles We seek to opportunistically invest in hedges to protect our portfolio against specific macroeconomic risks and capitalize on market volatility Asymmetric payoff structures Limited upfront investment and carrying costs Opportunities to generate large (
Slide 34: Differentiated View on Interest Rates
Differentiated View on Interest Rates We initially purchased interest rate hedges in late 2020 and early 2021, as we believed the Fed would need to raise rates much earlier than the market anticipated Headline CPI Inflation December 2022 Unemployment Rate (%YoY Change) Fed Funds Forward Rate(1) 6.7%
Slide 35: Overview of Interest Rate Hedge
Overview of Interest Rate Hedge Beginning in December 2020, we acquired out-of-the-money interest rate swaptions to protect our portfolio against an unexpected rise in rates Summary of Initial Interest Rate Hedge Program ($mm) Premium Proceeds / Multiple of Tenor Paid Market Value Capital Monetized
Slide 36: Track Record of Defensive Hedging
Track Record of Defensive Hedging Pershing Square’s hedging strategy has generated substantial gains across multiple volatile market environments since the firm’s inception Total Investment / Proceeds & Multiple Risk Factor Time Period Hedging Instrument Carrying Costs Market Value of Capital Subpri
Slide 37: Reinvestment of Hedge Proceeds into Netflix
Reinvestment of Hedge Proceeds into Netflix Amidst a volatile market backdrop in 2022, hedging gains provided the capital to fund the purchase of Netflix NFLX Share Price Performance From 12/31/2019 to 2/8/2022: 1/21/22 - 1/25/22: $700 Pershing Square $650 acquires 3.1mm shares of NFLX $600 $550 2/2
Slide 38: Netflix Overview
Netflix Overview World’s leading streaming subscription video-on-demand company Launched its category-pioneering streaming service in 2007 222 million global paid subscribers in over 190 countries today Ticker: NFLX Stock price: Vast and diverse library of high-quality content $404 Most Em
Slide 39: Netflix Investment Highlights
Netflix Investment Highlights ✓ Subscription-based business model with enormous future growth potential ▪ Leading beneficiary of decade-long secular growth in streaming video and decline in linear TV ▪ 222 million NFLX subscribers represent 1/4th of ~800 to 900 million addressable households ✓ Indus
Slide 40: Streaming vs. Traditional Pay TV Value Proposition
Subscription Video Streaming has a Vastly Superior Value Proposition Relative to Traditional Pay TV Traditional Pay TV Subscription Video Streaming Nearly a third of viewing time is allocated to Commercial-free commercials Restricted to viewing content airing at a On-demand viewing particula
Slide 41: Subscription Video Streaming is Growing Rapidly
Subscription Video Streaming is Growing Rapidly Subscription video streaming has consistently gained share from the declining Pay TV ecosystem, with revenues in the U.S. more than doubling since 2017 $28 U.S. Subscription Video Streaming Revenue ($ in billions): $22 $17 $13 $10 $8 $6 $4 $3 $2 $1 201
Slide 42: Netflix's Increasing Market Share of TV Market
Netflix’s Increasing Market Share of TV Market As the scaled market leader with constantly refreshed “content for everyone”, Netflix is steadily increasing market share of total video revenues Netflix U.S. Revenue as % of Total U.S. TV and Video Revenue:(1) 11% 10% 8% 7% 5% 5% 4% 3% 3% 2% 1% 2011 20
Slide 43: Organizational Update
Organizational Update
Slide 44: Organizational Update
Organizational Update Highly resilient and focused organization seamlessly navigated the impact of COVID-19 with no business disruption and recently returned to the office Seamless return to the office All staff returned to the office in late 2021 with a brief pause due to the Omicron variant
Slide 45: PSCM Organization Chart
PSCM Organization Chart William Ackman CEO & Portfolio Manager Nicholas Botta President INVESTMENT TEAM LEGAL & COMPLIANCE INVESTOR RELATIONS TRADING FINANCE FACILITIES PUBLIC RELATIONS TECHNOLOGY Tony Asnes Isabel Herrera Francis McGill Halit Coussin Ramy Saad Michael Gonnella Zachary Frayne Bharat
Slide 46: Pershing Square Investment Team
Pershing Square Investment Team Career PSCM Employee Education and Summary Prior Experience Experience Tenure (Years) (Years) Gotham Partners, Co-Founder and Portfolio Manager (1992 - 2003) Bill Ackman M.B.A., Harvard Business School, 1992 30 18 CEO / Portfolio Manager A.B., Harvard College, magna c
Slide 47: Portfolio Update
Portfolio Update
Slide 48: Lowe's (LOW)
Lowe’s (“LOW”) Lowe’s is a high-quality business with significant long-term earnings growth potential Supportive macroeconomic backdrop Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog COVID-19 causing millennials to enter the housing m
Slide 49: LOW Share Price Performance Since Inception
LOW Share Price Performance Since Inception LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022(1) LOW Share Price Performance From 4/6/2018 to 2/8/2022: $300 $260 12/9/2020: LOW 2020 Analyst Day highlights progress across many $232 $220 fronts. Int
Slide 50: Hilton Worldwide (HLT)
Hilton Worldwide (“HLT”) Hilton is a high-quality business with a multi-year runway of accelerated earnings growth and an exceptional management team Industry conditions poised to exceed pre-COVID levels in the near term Average daily revenue per room (“RevPAR”) likely to recover to pre-COVID leve
Slide 51: HLT Share Price Performance Since Inception
HLT Share Price Performance Since Inception HLT’s share price including dividends increased 40% in 2021 and has decreased 2% year-to-date in 2022(1) HLT Share Price Performance From 10/8/2018 to 2/8/2022: 12/1/21 – 12/31/21: Robust holiday and $170 leisure demand causes December U.S. RevPAR to incre
Slide 52: Chipotle Mexican Grill (CMG)
Chipotle Mexican Grill (“CMG”) Chipotle’s superb performance continued in 2021 driven by ongoing strength in digital sales and a recovery of in-store ordering Average restaurant sales have now eclipsed the 2015 peak of $2.5mm Same-store sales grew 19% in 2021, or 21% from 2019 levels ▪ Strong cont
Slide 53: CMG Share Price Performance Since Inception
CMG Share Price Performance Since Inception CMG’s share price increased 26% in 2021 and has decreased 16% year-to- date in 2022(1) CMG Share Price Performance From 8/4/2016 to 2/8/2022: $2,000 $1,800 7/20/21: Average restaurant 9/6/16: Pershing Square sales eclipse 2015 peak of $1,600 files 13D afte
Slide 54: Restaurant Brands International (QSR)
Restaurant Brands International (“QSR”) QSR is a high-quality business with significant long-term growth potential trading at a highly discounted valuation Comparable sales have recovered or are well on their way to recovery Tim Hortons Canada improved to a mid-single-digit decline during Q3 relat
Slide 55: QSR Share Price Performance Since Inception
QSR Share Price Performance Since Inception QSR’s share price increased 3% in 2021 and has decreased 7% year-to-date in 2022(1) QSR Share Price Performance From 6/9/2012 to 2/8/2022: 11/15/21: QSR $80 1/23/19: QSR announces leadership announces acquisition transition, elevating Daniel Schwartz to of
Slide 56: Howard Hughes Corporation (HHC)
Howard Hughes Corporation (“HHC”) HHC is successfully executing on the vast long-term value creation opportunity within its core master planned communities (“MPCs”) Redeployed proceeds from non-core asset sales into an MPC acquisition Announced $600 million acquisition of Douglas Ranch in Phoenix,
Slide 57: HHC Share Price Performance Since Inception
HHC Share Price Performance Since Inception HHC’s share price increased 29% in 2021 and has decreased 7% year-to- date in 2022(1) HHC Share Price Performance From 11/9/2010 to 2/8/2022: 10/21/19: HHC Board $170 6/27/19: HHC announces its concludes review Board of Directors will be process and announ
Slide 58: Domino's Pizza (DPZ)
Domino’s Pizza (“DPZ”) Domino’s is a high-quality business with significant long-term growth potential led by a strong management team Global #1 QSR pizza brand with attractive business model Category leader with crown jewel digital and delivery infrastructure Long-term same-store sales growth o
Slide 59: DPZ Share Price Performance Since Inception
DPZ Share Price Performance Since Inception DPZ’s share price including dividends increased 58% from our average cost at inception to December 31, 2021, and has decreased 22% year-to-date in 2022(1) DPZ Share Price Performance From 3/8/2021 to 2/8/2022: $600 10/14/21: DPZ reports Q3 earnings, with U
Slide 60: Fannie Mae (FNMA) and Freddie Mac (FMCC)
Fannie Mae (“FNMA”) and Freddie Mac (“FMCC”) Despite an adverse Supreme Court ruling in June, we believe Fannie and Freddie remain valuable perpetual options Supreme Court largely sided with the government against shareholders Found the Third Amendment to the PSPAs(1) to be authorized under the HE
Slide 61: FNMA and FMCC Performance Since Inception
FNMA and FMCC Performance Since Inception FNMA and FMCC share prices declined 66% and 64%, respectively, in 2021 and both increased 5% year-to-date in 2022(1) FNMA and FMCC share price performance from 10/7/2013 to 2/8/2022: 9/6/19: Fifth Circuit 5/5/14: Pershing Square ruling in Collins $6 presents
Slide 62: Exited Positions
Exited Positions
Slide 63: Agilent Share Price Performance Since Inception
Agilent Share Price Performance Since Inception Agilent’s share price including dividends increased 30% in 2021 through our last share sale on August 5, 2021 A share price performance from 9/4/2019 to 8/5/2021: $170 12/9/20: Agilent hosts Analyst Day and $154 $150 raises long-term revenue growth and
Slide 64: SBUX Share Price Performance Since Inception
SBUX Share Price Performance Since Inception SBUX’s share price including dividends increased 1% in 2021 through our last share sale on March 26, 2021 SBUX share price performance from 7/13/2018 to 3/26/2021: 12/9/20: SBUX hosts 1/31/20: Pershing Square completes $110 biennial investor day $110 sale
Slide 65: Q&A
Q&A
Slide 66: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results PSH NAV appreciation is calculated with respect to PSH’s Public Shares. Results are presented on a net-of-fees basis. Net returns include the reinvestment of all dividends, interest, and capital gains from underlying portfolio companies and ass
Slide 67: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results Share price performance data for a portfolio company takes into account the issuer’s dividends, if any. Share price performance data is provided for illustrative purposes only and is not an indication of actual returns of PSH over the periods p
Slide 68: Additional Disclaimers Related to SPARC
Additional Disclaimers Related to SPARC Whether and when a SPARC Distribution may take place remains subject to the approval of amendments to the stock exchange listing rules permitting the listing of the SPARCs and the SEC review process and declaration of effectiveness of an SEC registration state
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