The year for revenge: The comebacks and comeuppances that defined 2019
Business and investing victories are sweet, but they can be even sweeter when they come with a little dose of something on the side: revenge. Be it a corporate comeback, a reputation-restoring bet or a bucket-list acquisition, there really is nothing like proving the naysayers wrong. And in 2019, more than a few big names got in on the action. The Financial Post’s Geoff Zochodne compiled the highlights.
Gerry Schwartz vs. the past: In 1999, Schwartz’ private equity firm Onex Corp. tried to buy and merge Air Canada and Canadian Airlines, an effort that failed after a bruising public battle. Since then, Onex has made significant acquisitions in the aerospace industry, but buying a major airline — a feat one analyst dubbed Schwartz’s “white whale scenario” — had eluded it. Until this year, that is. Twenty years after Air Canada slipped through its fingers, Onex successfully acquired Calgary-based WestJet Airlines Ltd. in a $5-billion deal that closed in December. The acquisition makes Onex a major player in a consolidating Canadian airline industry and will put him toe-to-toe with the company he once coveted.
Bill Ackman vs. his doubters: Sometimes revenge is a dish best served in a burrito. Ackman’s Pershing Square Capital Management disclosed a nearly 10 per cent stake in fast food giant Chipotle in Sept. 2016, after the company had been hit by a series of food scares, only to watch the shares slide even lower. But since falling below US$300 a share in 2018, Chipotle has been on a tear. The stock price has risen above US$800 and is up more than 90 per cent in 2019 — having nearly doubled since Ackman bought in — as the chain has seen digital sales rise. For Ackman, whose reputation took a hit after he reportedly lost US$4-billion on a misguided bet on drugmaker Valeant Inc. and was forced to abandon a highly publicized short campaign against supplement maker Herbalife Inc., Chipotle’s surge has not only been profitable, but has silenced the critics who had written off the hedge fund titan.
Home Capital Group Inc. vs. the bears: It was a little more than two years ago that the walls appeared to be falling in on Home Capital. Accused of misleading investors, shares of the alternative mortgage lender were plummeting and customers were pulling their deposits. Then along came an investment by the Oracle of Omaha, Warren Buffett, and a $2-billion line of credit. The bleeding was stopped, but some investors, particularly those bearish on the Canadian housing market, remained skeptical. Cut to 2019 and Home Capital has become a golden child for the investors who stuck with it. Shares of the company more than doubled in 2019, as it reported solid earnings and continued to buy back big chunks of its stock. With the Canadian housing market showing signs of getting back on track, this comeback story may not be over yet.
Elon Musk vs. the short-sellers: If anyone got more satisfaction from a dose of revenge in 2019 than Elon Musk, we’re not sure who it was. The chief executive of electric automaker Tesla Inc. has waged a years-long feud with short-sellers who have swarmed his company, believing its soaring valuation, grandiose ambitions and limited sales were a recipe for disaster. Over the years, Musk has called short-sellers “jerks who want us to die,” has suggested short-selling “should be illegal,” and derided the Securities and Exchange Commission as the “Shortseller Enrichment Commission.” Musk seemed to be on the ropes when Tesla’s shares tumbled below US$200 earlier this year, but strong results in the third quarter turned the tables and sent the shorts running for cover. With the stock rocketing back to top US$400, Musk couldn’t resist rubbing it in, offering to send hedge-fund manager and high-profile Tesla short David Einhorn a pair of “short shorts” to mark his victory.
Putin vs. the West: Sanctions? What sanctions? Russia has been in the global doghouse since the annexation of Crimea in 2014, but despite the asset freezes and travel bans, the economy was surprisingly resilient in 2019. The Russian RTS index of stocks is up more than 40 per cent this year, making it one of the world’s best-performing benchmarks, buoyed in part by interest rates cuts. And while the West may be staying away from dealing with Russia, others have not. Take, for example, the 3,000-kilometre natural gas pipeline connecting Russia and China that was recently activated, a US$55 billion project that is set to return US$400 billion to Russia over 30 years. The completion of such a project, while Canada continues to grapple with gridlock in building new energy infrastructure, could give President Vladimir Putin a chuckle, if not the last laugh.