How Bill Ackman Turned $27M Into $2.5B In 10 Days During COVID-19 Pandemic

Pershing Square Management's Bill Ackman recently disclosed making one of the most profitable bets in history during an interview with Robinhood CEO Vald Tenev.

The billionaire investor, who is busy with Pershing's IPO, which he plans with the vision to create a modern-day Berkshire Hathaway, is known for his opportunistic trading pattern and extraordinary foresight.

When the World Health Organization declared the COVID-19 pandemic in early March of 2020, Ackman knew he had to protect his ailing father, Larry Ackman, as well as investments. He braced for economic impact by purchasing credit default swaps on corporate bonds over a 10-day period.

'There was this massive storm coming. We could see the storm, but everyone else was playing on a beach,' Ackman had said.

The swaps reportedly insured Pershing Square Capital Management's positions in case the market started moving in a negative direction. Note that a credit default swap is an agreement where the seller pays the buyer if a particular debt defaults.

Overall, Ackman's purchases had a $74 billion notional value in insurance, representing the total amount of risk covered. 'It cost us only $27 million. Ten days later, it became worth $2.6 billion. We took that money in March 2020, with the market down 30%, [and] we bought stocks,' he said.

Did Ackman Trigger Market Panic?

While Ackman's bet is an impressive example of timing the market, his X posts back then were also severely criticised as they allegedly drove market panic.

In an interview with CNBC, Ackman had said that 'hell is coming.' He had bet on the US economy facing a short-term shock due to the complete lockdown, and critics think his messaging triggered further panic.

'Mr. President, the only answer is to shut down the country for the next 30 days and close the borders,' Ackman said in his March 18 post on X. 'Tell all Americans that you are putting us on an extended Spring Break at home with family. Keep only essential services open. The government pays wages until we reopen.'

Takeaway From Ackman's Strategy

Ackman, who considers Warren Buffett his mentor, is popular for identifying broader market patterns. At the same time, he keeps emotions out of the equation when placing trades.

'I'm not emotional about investments,' Ackman had told the New York Times earlier. 'Investing is something where you have to be purely rational and not let emotion affect your decision making — just the facts.'

Over the past many years, Ackman has expressed his admiration for Buffett. When Ackman launched his first hedge fund at 26, he had noted: 'I thought that perhaps someday I could build a diversified holding company like Berkshire with an extraordinary long-term record.'

Ackman founded Pershing Square in 2004 and has built his fortune through high-stakes investments and activist strategies. He started targeting undervalued companies and pushing for structural changes to increase shareholder value. His most successful bets include stakes in Chipotle Mexican Grill, Hilton Worldwide, and Restaurant Brands International, the parent company of Burger King and Popeyes.

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