Ackman said he believes Target shares are undervalued and plans to discuss ways to improve the company's stock price with its management team. Ackman said Target has "a differentiated brand, significant growth opportunities and the strongest operating management in the retail industry."
Pershing Square is known for pushing companies to increase profitability. Ackman has acquired stakes in Wendy's International, McDonald's and Ceridian. At Wendy's, for example, Ackman is credited with persuading the company to spin off its Tim Hortons coffee chain.
In a research note earlier Monday, Goldman Sachs analyst Adrianne Shapira wrote that Target's credit card portfolio and real estate ownership are likely areas of focus for Ackman to improve value.
However, Shapira noted that Target Chief Financial Officer Douglas Scovanner recently commented that "as deeply integral as these credit card operations are to our retail operations, we have neither a strategic nor a financial benefit in mind in engaging in any kind of transaction, such as a sale."
Shapira points out that Ackman's investment in Target is different than some of his past actions because the company's fundamentals are strong and shareholders have been rewarded. She maintained a 12-month price target of $72 and a "Neutral" rating on Target shares.
In the filing, Ackman said he bought the Target shares for a total price, including brokerage commissions, of $1.98 billion. Pershing Square said it will donate one-third of the net after-tax realized profits from any investments in Target to charitable organizations, including the Pershing Square Foundation.
Target shares jumped 7% to $70.04 on Thursday after published reports citing a source close to the matter attached Ackman's name to Target. The stock further increased to a new 52-week high of $70.75 on Friday, and closed at $70.14.