Pershing Square's Buyback Gambit: A Deep Dive Into the NAV Discount

LONDON, UK – December 12, 2025 – Pershing Square Holdings, Ltd. (PSH), the investment vehicle led by activist investor Bill Ackman, continues its methodical campaign of share repurchases, announcing another buyback on December 11. While the daily transaction—21,732 shares for approximately $1.46 million—is a drop in the ocean for the multi-billion-dollar fund, it represents another step in a long-running, aggressive strategy to tackle its most persistent challenge: a steep and stubborn discount between its share price and its Net Asset Value (NAV).

This latest purchase, executed at an average price of $67.32, stands in stark contrast to the fund's NAV per share of $87.73 recorded just days earlier. For investors and market watchers, this nearly 23% gap on the day of purchase (and a wider 30-34% historical discount) is the central puzzle of PSH. The ongoing buybacks are management's primary tool in a multi-pronged effort to solve it, signaling both a deep-seated belief in the portfolio's undervaluation and a tactical necessity to create shareholder value. Understanding this strategy is crucial for stakeholders across all sectors, as PSH's capital allocation decisions have far-reaching implications for the corporate landscape, including the healthcare and life sciences industries where it has been a formidable player.

The Closed-End Conundrum

To grasp the significance of Pershing Square's actions, one must first understand its structure. As a closed-ended fund, PSH trades on the stock exchange like a regular company, with a fixed number of shares. Unlike open-ended mutual funds, which create or redeem shares daily at their NAV, a closed-ended fund's share price is determined by market supply and demand. This can, and often does, lead to the share price detaching from the underlying value of its investment portfolio (the NAV).

For PSH, this detachment has become a chronic condition. Despite a stellar investment performance, the discount has remained stubbornly wide. For instance, in the first half of 2025, the fund generated a NAV return of 15.5%, handily beating the S&P 500's 6.2% gain. Yet, during that same period, the discount to NAV actually widened from 31.2% to 34.6%. It's a frustrating paradox for management and shareholders alike: the better the fund performs, the wider the value gap can sometimes grow.

This discount effectively means investors can buy a piece of PSH's portfolio—comprised of large, liquid public companies—for significantly less than its market value. While this might seem like a bargain, a persistent discount can weigh on shareholder returns and reflects a degree of market skepticism, whether about the fund's strategy, its fee structure, or its concentrated positions. Addressing this "conundrum" is not just about optics; it's about fulfilling the core promise of delivering the portfolio's intrinsic value to shareholders.

A Multi-Billion Dollar Commitment

Faced with this persistent discount, Pershing Square initiated its first share buyback program in May 2017. Since then, the strategy has evolved from a simple tool to a cornerstone of its capital allocation policy. The scale of this commitment is substantial. As of November 2025, PSH had repurchased a staggering 72.8 million shares for a total of $1.7 billion. This represents more than a quarter of the fund's initial share count, bought back at a weighted average price of just under $24 per share—a price point that looks prescient given today's trading levels.

The current activity is part of a newly announced $100 million program, which itself is the first half of a doubled-down $200 million authorization. By consistently buying back its own shares at a significant discount to NAV, PSH mechanically generates value for the remaining shareholders. Each repurchased share is retired to treasury, reducing the total share count and thereby increasing the NAV attributable to each outstanding share. It is one of the most direct and accretive actions a company trading below its intrinsic value can take.

The buyback program is renewed annually by shareholders, giving management a standing mandate to repurchase up to 14.99% of its public shares. This continuous, methodical approach demonstrates a long-term resolve to use the market's own pricing inefficiency as a source of returns.

Confidence Signal or Tactical Necessity?

The motivation behind PSH's buyback strategy is twofold. On one hand, it is an unequivocal statement of confidence from management. By deploying hundreds of millions of dollars to buy its own stock, PSH is effectively "investing" in its own portfolio at a steep discount, signaling a firm belief that the market is mispricing its assets. It is the ultimate expression of "eating your own cooking."

On the other hand, the buybacks are a tactical necessity. While the board has stated that strong, sustained NAV performance is the ultimate driver of shareholder value, the market has shown that performance alone may not be enough to close the discount. Strategic initiatives, such as a planned (but later shelved) US-listed fund and a consolidation of its listing on the London Stock Exchange, have been part of a broader effort to improve trading liquidity and investor perception. However, the buyback remains the most direct and reliable lever at their disposal.

Despite the program's scale, some analysts remain skeptical that it is sufficient on its own. A $200 million authorization, while significant, represents only about 1.3% of the fund's net assets. Critics argue that a more dramatic intervention might be needed to permanently narrow a 30%+ discount. The market's reaction has been muted, suggesting that investors now view the buybacks as a regular, expected feature of PSH's operations rather than a catalyst for a major re-rating.

Strengthening the Platform for Future Action

For professionals and investors in the healthcare and life sciences sectors, the internal financial engineering at Pershing Square is more than just a corporate finance case study. PSH is a major capital allocator with a history of taking large, concentrated, and often activist stakes in public companies. Its past involvement with firms like Valeant Pharmaceuticals and its current significant holding in animal health leader Zoetis demonstrate a willingness to engage deeply with the broader healthcare ecosystem.

By systematically addressing its discount to NAV and enhancing per-share value, PSH is not just rewarding its current shareholders; it is strengthening its own corporate structure and reinforcing its "permanent capital" base. A more efficiently priced stock could, in the long run, provide PSH with greater strategic flexibility, potentially allowing it to use its own shares as a currency for transactions or to more easily raise new capital for transformative investments.

Every dollar spent buying back its own shares at a discount is a dollar that accretively grows the NAV, increasing the fund's capital base for future activist campaigns or long-term holdings. Therefore, this relentless focus on closing the value gap is directly linked to maintaining and enhancing its firepower as one of the market's most influential investors. As PSH continues its battle against the discount, industry leaders across all sectors, including healthcare, would be wise to watch closely. The stronger and more efficient Pershing Square's own platform becomes, the more formidable a force it will be in the public markets where it chooses to invest.