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Holy Chipotle! Bill Ackman Takes $1.2 Billion Position In Chipotle Mexican Grill Inc (CMG)

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A new 13D filing with the SEC shows that Bill Ackman‘s Pershing Square has taken a 9.9% stake in Chipotle Mexican Grill Inc (NYSE:CMG), consisting of 2.88 million shares of the fast-casual restaurant company’s stock. The filing reports that the shares were purchased at an aggregate cost of just under $1.20 billion. The stunning move is Ackman’s biggest splash since he took a 7.5% stake in Mondelez International Inc (NASDAQ:MDLZ) during the third quarter of 2015. Unlike that move, which the market reacted to with tempered enthusiasm, market participants appear much more bullish on Ackman’s latest play, as Chipotle’s shares have popped by 6.26% in after-hours trading.

The filing revealed that Ackman believes Chipotle Mexican Grill Inc (NYSE:CMG) to have “a strong brand, differentiated offering, enormous growth opportunity, and visionary leadership,” and that the company’s shares are undervalued and make for an attractive investment. After a dominant two-and-a-half-year run from the start of 2013 in which Chipotle’s shares gained 150%, they have fallen on hard times, losing 42% of their value over the past year. Chipotle shares have been unhelped by outbreaks of E. coli, norovirus and salmonella at several of the company’s locations, leading to Chipotle’s comparable-store sales to have slumped by an ugly 26.5% in the first-half of 2016.

While the filing asserts Ackman’s belief in the company’s leadership, it also states that he will engage in discussions with that leadership on a variety of issues, including the composition of its Board, which could suggest that the activist investor has an eye on a Board seat for himself and/or another member of his team.

Not everyone agrees with Ackman’s assessment of Chipotle’s growth potential or the competency of its management, as restaurant analyst Howard Penney suggested earlier today that Chipotle’s shares could yet crumble by another 50%. Among other things, Penney stated that “Management doesn’t know what they’re doing,” and that the company’s summer rewards program is a “joke”. In addition to the food health scandals, Chipotle is also facing criminal investigations related to how those incidents were handled.

Bill Ackman in crowd

There was a small increase in hedge fund sentiment towards Chipotle Mexican Grill Inc (NYSE:CMG) during the second quarter, as though the number of hedge funds in our system with positions in the company remained unchanged at 39, the value of their holdings jumped to $1.69 billion from $1.22 billion. That was despite shares of the company declining by 14.4% during the quarter, which suggests that Chipotle bulls felt the bottom had been reached and were fortifying their positions. Eashwar Krishnan’s Tybourne Capital Management and David Blood and Al Gore‘s Generation Investment Management each opened large new Chipotle stakes during the quarter. Tybourne Capital held 595,325 shares on June 30, while Generation Investment Management owned 573,384 shares.

Follow Chipotle Mexican Grill Inc (NYSE:CMG)
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You can access the original SEC filing by clicking here.

Ownership Summary Table

Name Sole Voting Power Shared Voting Power Sole Dispositive Power Shared Dispositive Power Aggregate Amount Owned Power Percent of Class
Pershing Square Capital Management 2,882,463 2,882,463 2,882,463 9.9%
PS Management GP 2,882,463 2,882,463 2,882,463 9.9%
William A. Ackman 2,882,463 2,882,463 2,882,463 9.9%
Bill Ackman
Bill Ackman
Pershing Square

Page 1 of 11 – SEC Filing

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED

PURSUANT TO § 240.13d-2(a)

Under the Securities Exchange Act of 1934

 

 

Chipotle
Mexican Grill, Inc.

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

169656105

(CUSIP Number)

Stephen Fraidin, Esq.

Steve Milankov, Esq.

Pershing Square Capital Management, L.P.

888 Seventh Avenue, 42nd Floor

New York, New York 10019

(212) 813-3700

With a
copy to:

Richard M. Brand, Esq.

Gregory P. Patti, Esq.

Cadwalader, Wickersham & Taft LLP

One World Financial Center

New York, NY 10281

(212)
504-6000

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

August 24, 2016

(Date of
Event which Requires Filing of this Statement)

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