Billionaire investor William Ackman has been tripped up by a bet that he could transform a giant retailer.
His $1 billion investment on J.C. Penney is in tatters as he left the company's board on Tuesday after waging a two-year campaign to revive its tired stores with an upscale make over.
"You learn from mistakes," Ackman told PBS-TV interviewer Charlie Rose, according to a transcript. "Investing is a business where you can look very silly for a meaningful period of time before you're proven right."
(Read more: Ackman quits Penney board; not selling shares)
After an earlier failed attempt to force changes at retailer Target, the Penney wager raises questions about whether Ackman, who has a proven knack for real estate deals, is as skillful in betting on retailers.
"The investments Ackman does well with usually have a healthy real estate component to them," said Damien Park, managing partner at consulting firm Hedge Fund Solutions. "But he has historically struggled when getting more deeply involved with managing fundamental operational issues," as he tried to do with Penney.
After Ackman disclosed his Penney stake in October 2010, he repeatedly told skeptics that they would be shopping at the store when the overhaul was done.
(Read more: Activist investor Ackman makes his biggest bet ever)
As a board member, Ackman coaxed Ron Johnson to leave Apple and run JC Penney in 2011, even calling him the Steve Jobs of the retail industry. But the makeover failed, new shoppers did not come, and the stock price tumbled to $12.68 on Tuesday from $42.44 in early 2012.
Now Ackman and investors in his $11.2 billion Pershing Square Capital Management are sitting on paper losses of more than $350 million.
"Bill Ackman made a very bad bet," said Paul Argenti, a professor at Dartmouth's Tuck School of Business. "He made a lot of mistakes, but some of his ideas were right on, including replacing the CEO. But he picked the wrong horse."
(Read more: J.C. Penney Is Bringing Back Sales)
As Johnson lost confidence among the rank and file and board members planned for his exit in early April, Ackman lost his touch in persuading the board to see things his way, people familiar with the matter said.