October 6, 2008 / 7:01 PM / 11 years ago

UPDATE 2-Pershing Square's Ackman says short sale ban hurt

(Adds further comments on SEC, Wachovia; bylines)

By Jennifer Ablan and Svea Herbst-Bayliss

NEW YORK, Oct 6 (Reuters) - Hedge fund manager William Ackman said on Monday that global regulators rattled investor confidence by briefly banning investors’ bearish bets on stocks, and that psychology, not fundamentals, is moving markets.

Ackman, who runs New York-based Pershing Square Capital Management, said the short-selling ban “did more to destroy investor confidence than anything.”

Regulators around the world have put restrictions on hedge funds and other investors that sell stocks short — a bet that a stock price will go down — to help stabilize cratering financial stocks.

“Short sellers have been blamed for bringing down the market, but since the ban, the markets have been falling even further, which means ‘the longs’ are selling now,” Ackman told reporters in a question-and-answer session after addressing the Value Investing Congress in New York.

On Monday, the Dow Jones industrials .DJI plummeted 800 points before closing down 370 points, or 3.6 percent, to 9950.50 -- settling below 10,000 for the first time since October 2004.

Many hedge fund managers have complained that the ban prevents them from properly hedging their portfolios and has caused many fund managers to suffer heavy losses.

Ackman, an activist investor who has won changes at companies like Wendy’s International Inc WEN.N and McDonald’s Corp (MCD.N), said stock prices are getting “extremely cheap” as the market tumbles lower amid worries about sluggish growth.

He said a “psychology of fear” is gripping the markets, and investors are often not basing decisions on fundamentals.

Last week, his fund bought 180 million shares in Wachovia Corp WB.N — at the center of a bidding war between Wells Fargo & Co (WFC.N) and Citigroup Inc (C.N) — which he called an “incredibly strategic asset” for either bank.

Ackman asserted that Wachovia would be worth more if it sold off its banking and brokerage businesses separately because of the tax benefits of such a transaction.

He added that Wachovia “did the right thing and acted appropriately” in accepting Wells Fargo’s $15 billion offer, adding that Citi made several mistakes in its initial agreement to buy Wachovia, such as waiting too long to sign an agreement.

Ackman said Citi “acted as though the deal was done.”

Punctuating the hasty nature of the agreement, Ackman repeatedly pointed out that in its Sept. 29 press release announcing the Citi deal, Wachovia spelled the word “subsidiary” as “subsidary.” (Editing by Jeffrey Benkoe)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below