NEW YORK (Reuters Breakingviews) - Credibility is everything to an activist. That makes Tuesday’s defeat at ADP especially embarrassing for Bill Ackman. Fewer than one shareholder in four backed the Pershing Square boss’s bid for three seats on the payroll processor’s board.
The result capped a bitter three-month battle between the hedge-fund boss and his Roseland, New Jersey-based target. Ackman argued that ADP was losing ground to upstart rivals and needed to respond by changing management incentives and putting more emphasis on software development. He secured the backing of the major proxy advisers: Glass Lewis and Egan-Jones called on holders to vote for his three nominees, while Institutional Shareholder Services supported a single seat for Ackman.
But ADP wasn’t an obvious target. Its stock had more than doubled over the preceding five years, handily outperforming the S&P 500 – and Pershing Square’s own Amsterdam-listed shares. The company has been working on its digital strategy at a pace that doesn’t scare off existing customers.
Chief Executive Carlos Rodriguez didn’t shrink from the fight, either. He vigorously defended the company’s performance and strategy and lambasted Ackman as a “spoiled brat.” Rodriguez was anything but magnanimous in victory on Tuesday, declaring the result “an ass-whipping” for his nemesis.
Shareholders seem ready to give Rodriguez time to execute ADP’s technological shift. Although the stock has given up half the 12 percent bump it got when news of Pershing Square’s stake first broke back in July, it was trading nearly 1 percent higher after the meeting.
Ackman is unlikely to get such a respite. His listed vehicle was down 3.3 percent net of fees in the first 10 months of this year, while Hedge Fund Research’s Activist Index gained 5.7 percent in the first three quarters. He’s now on a three-year losing streak. Failed bets on drugmaker Valeant and against Herbalife, a nutritional-supplement maker Ackman alleged was a Ponzi scheme, contributed to the fund’s negative returns of 13.5 percent last year and 20.5 percent in 2015. Chipotle Mexican Grill, another key holding, is down 42 percent so far this year.
Investing isn’t baseball. But after striking out on three big campaigns, Ackman will have a hard time persuading management – and investors – to take him seriously in the future.
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