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The Morning Brief: ADP vs. Ackman vs. Chapman

It was a crazy day for the payroll processing giant, with Pershing Square’s Bill Ackman critiquing its management in a three-hour press conference, followed by another activist announcing he is shorting the stock.

What a wild day for ADP. First, activist Bill Ackman delivered a three-hour, 167-slide presentation — evoking memories of his initial Herbalife marathon — explaining why he can boost the valuation of the human resources and payroll processing company. The lecture was heavy on criticism of company management and its accounting. Pershing Square owns an 8 percent stake in the company and has nominated three directors to the board of directors.

Bloomberg points out that the Pershing Square Capital Management founder made a good case for the company using software better and boosting its margins by making its employees more productive. ADP then responded , stating in a press release: “ADP is committed to engaging constructively with shareholders on important issues facing the company. However, we strongly disagree with many of the assertions made by Mr. Ackman in today’s presentation, which betrays a fundamental lack of understanding of the current state of ADP’s business and strategy. He presented nothing that has not previously been analyzed by the Board and management…We are confident that we have the right plan underway to ensure ADP’s future success.”

Then sometime midday, short-seller Robert Chapman went on CNBC to say he has shorted ADP’s stock. “Making a dollar being short an Ackman stock feels as good as making $10 on one that he is not long,” mused Chapman, who disagreed with Ackman’s earlier short bet on Herbalife. The upshot: By day’s end, shares of ADP fell 5.8 percent, to close at $104.68.


Keith Meister’s Corvex Management boosted its stake in CenturyLink to 6.6 percent. It also included standard language to suggest it will regularly review the stock and may take some sort of future action. The stock plunged 7.25 percent on Thursday and is down 30 percent over the past two months. Corvex recently disclosed that CenturyLink is its largest position. Meister discussed this investment at the Sohn Investment Conference in New York in May.


Boaz Weinstein’s Saba Capital Management announced an agreement with First Trust Strategic High Income Fund II, a closed-end mutual fund. Under the deal, prior to or during the week of August 28 First Trust will initiate a cash tender offer for up to 15 percent of the fund’s shares at a price per share equal to 98 percent of the fund’s net asset value (NAV). In addition, Saba has agreed to certain standstill covenants until January 20, 2020.

“We are pleased to have reached this agreement with the board of First Trust and believe this outcome best serves the interests of the fund and all of its shareholders,” Saba said in a statement. In January Saba reached an agreement with First Trust High Income Long/Short Fund.

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