Hedge fund maven Bill Ackman buys a tenth of Chipotle to help turn the company around

Hedge fund maven Bill Ackman buys a tenth of Chipotle to help turn the company around
Source: Getty Images
Source: Getty Images

Bill Ackman is one of the most famous hedge fund managers out there — averaging a yearly return of 12%, "one of the best records in the business" according to Reuters

He also is known for his tendency to make bold bets. 

For instance, he is still in the midst of a yearslong quest to take down the nutrition supplement company Herbalife, which he believes to be a pyramid scheme. 

Now, Ackman is betting that he can turn around Chipotle. He announced on Tuesday that he's buying 2.9 million shares of the company's stock, a more than $1 billion purchase which will give him ownership of nearly a tenth of the company. 

The beleaguered fast food chain's stock price has fallen 45% from its all-time high last year, thanks to an outbreak of food-borne illness that reached 15 states. 

Troubles didn't stop there. Back in July, the company's chief creative and development officer was put on leave after facing charges for cocaine possession. 

The company has worked hard to bring back customers by being generous with free burritos, setting up a loyalty program and revamping its food-safety program. 

Chipotle has, among other things, revamped its food-safety protocols.
Source: 
Rodrique Ngowi/AP

The company has also been mocked for some of its social media outreach, with one thirsty tweet standing out in particular:

However, Ackman's stake in the company might represent something of a turning point. 

At nearly 10%, Ackman will own a fairly large percentage of the company's shares, the most of any investor except Fidelity Investments

Vouching for the company, which his firm said in a regulatory filing was "undervalued," is a vote of confidence in the brand. Shares immediately surged after the news on Tuesday, and continued to move up during pre-market trading on Wednesday morning.  

While the move might seem bold at first, Ackman's play might actually be a testament to one of the oldest axioms of stock-market investing: Buy low, sell high

Though it's fairly intuitive that one would seek out bargains in the stock market, as one would when they're shopping for anything else, many individual investors tend to do the opposite

How much do you trust the information in this article?

James Dennin

James is a staff writer covering money and millennials. Send your tips and your money problems to jdennin@mic.com.

MORE FROM

Sick of being "on call" nights and weekends? How to start saying no to your boss.

How to fight back if your boss makes you stay late, constantly check email, answer phone calls on weekends or perform other tasks that are destroying your work-life balance.

What will happen to health care? 3 possible scenarios — and how they’d affect you.

Your health insurance premiums, deductibles and out-of-pocket costs could change under new health care rules. What to know about potential shifts in the law and the prices you'll pay.

3 clever ways Gen Z is knocking down the cost of college

Monstrous student debt? No way. Teens are disrupting the old way of thinking about education.

The 10 best and worst US cities for stress

Reduce stress and relax more by moving to one of these best places in America for a chill job, happy family and healthy lifestyle.

5 smart summer reads to make you richer, happier and more successful

These top new books about money and success may inspire you to make big life and career changes this summer.

Here’s how much childcare really costs in 2017

Child care can cost more than $30,000 a year, according to a new survey. And many families spend 20% of their income to foot the bill.

Sick of being "on call" nights and weekends? How to start saying no to your boss.

How to fight back if your boss makes you stay late, constantly check email, answer phone calls on weekends or perform other tasks that are destroying your work-life balance.

What will happen to health care? 3 possible scenarios — and how they’d affect you.

Your health insurance premiums, deductibles and out-of-pocket costs could change under new health care rules. What to know about potential shifts in the law and the prices you'll pay.

3 clever ways Gen Z is knocking down the cost of college

Monstrous student debt? No way. Teens are disrupting the old way of thinking about education.

The 10 best and worst US cities for stress

Reduce stress and relax more by moving to one of these best places in America for a chill job, happy family and healthy lifestyle.

5 smart summer reads to make you richer, happier and more successful

These top new books about money and success may inspire you to make big life and career changes this summer.

Here’s how much childcare really costs in 2017

Child care can cost more than $30,000 a year, according to a new survey. And many families spend 20% of their income to foot the bill.