Dive Brief:
- Bill Ackman and his company Pershing Square are selling 20 million shares of Mondelez International, which reduces Pershing's stake in Mondelez from 7.5% to 5.6%. Mondelez shares have dipped approximately 3%.
- Pershing is "reducing the position size for portfolio management purposes only," Ackman told investors in an email.
- Ackman initially announced his stake in Mondelez last August and immediately pushed the company to further cut costs and expand profits or to prepare for a company sale.
Dive Insight:
"We reduced our stake because Mondelez had become an outsized position in light of its initially large size and its outperformance relative to other holdings," Ackman wrote. "We continue to believe in the potential for operating improvements and margin expansion that we expect will lead to substantial further increases in value. As a result, it remains our largest exposure."
So far this year, Mondelez shares have fallen 7%. Ackman has said in the past that despite significant efforts by Mondelez, more cost-cutting would be needed to drive margins higher, as Mondelez's margins were still lagging behind the competition. In its latest earnings release, Mondelez reported sales declines but also said its gross profit margin rose 230 basis points in 2015.
Mondelez CEO Irene Rosenfeld told The Wall Street Journal last year about her frustration with investors' fascination with activists. Rosenfeld said fielding opinions from activist investors takes about one-quarter of her time, and those opinions have gone beyond cost-cutting to also include changing product selection, shelf space, and marketing.
Mondelez's performance isn't the full story of Ackman and Pershing's stake sale. Pershing is also a major investor in Valeant Pharmaceuticals, which has been a losing ordeal for Pershing. Losses on that investment total about $2.5 billion to date, including $1 billion earlier this week. Pershing had also just added more shares to this already draining investment last week.