• by Thom Forbes  @tforbes, August 22, 2013

With his billion-dollar bets on J.C. Penney and Herbalife situated far south of where he expected them to be, it has been increasingly clear that Pershing Square Capital Management honcho William Ackman would have “some splainin to do,” as Ricky used to say to Lucy. Yesterday he did so in a 23-page letter to his shareholders replete with disclaimer and notes.

“Clearly, retail has not been our strong suit, and this is duly noted,” he said, referring not only to Penney, from whose board of directors he “voluntarily” resigned earlier this month after yet-another spat in public with other members over the performance of a sitting CEO, but also to past failures Borders and Target.

“He said he may exit Penney, where he owns 39 million shares and is the company’s biggest investor, but would not say when. At Target, he stuck it out for 19 months after losing a bitter and expensive proxy fight, he reminded investors,” reports Reuters’ Svea Herbst-Bayliss. 

As for Borders, Pershing “took a $200 million bath,” as the New York Post’s Mark DeCambre puts it, when it went belly-up in 2011. “Borders was a big mistake on the buy,” Ackman told “CNBC producer and Wall Street insider” Maneet Ahuja for the “hedge-fund tome,” The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds, DeCambre reports.

“Retailing is for retailers. It’s not for hedge fund managers,” Erik Gordon a law and business professor at the University of Michigan, tells Herbst-Bayliss. “Successful retailers have spent their whole lives in the business. Ackman finally figured that out.”

By all accounts, Ackman is in pretty hot and deep water with Herbalife, too -- to the tune of about $300 million thus far -- but Ackman maintains he may still be on the right side of discernment about a company he has repeatedly charged is “a pyramid scheme.” And he suggests that he’s got the law on his side, although others make a convincing case that there’s a big legal difference between a multi-level marketing scheme (MLM) and a Ponzi-like scheme.

“Over the past eight months, we have made material progress in attracting federal, state and international regulatory interest in Herbalife,” Ackman writes and the New York Times’ William Alden cites. “We are not at liberty to disclose the nature of these developments, but we believe that the probability of timely aggressive regulatory intervention has increased materially.”

Plus, writes Alden, he is “pursuing a product safety angle against the company, saying in the letter that he had been in contact with a former employee whom he called a ‘whistle-blower.’”

He also cites the defections of some “top distributors” to other MLMs, as well as the apparent suicide of a “Founders Circle member,” as proof of disarray in the company, according toBusiness Insider’s Joe Weisenthal.

Barron’s Ben Levisohn points out that Argus analyst John Staszak raised Herbalife to Buy from Hold but cites Ackman’s letter as the reason why its shares dropped 0.7% to $64.24 in trading yesterday, suggesting that he still holds sway in the market despite the current setback.

All in all, Ackman comes across as defiant, feisty and unapologetic even as he apologizes for a few miscues here and there. The tone of the letter suits hedge-fund owner Whitney Tilson just fine, according to the Wall Street Journal’s David Benoit and Emily Glazer.  

Tilson tells them that Ackman “owed no apology to investors and called the letter ‘one of the best’ he has read given the scrutiny” he has faced. “Investing is a probabilistic game. If you are right 60% of the time, you’ll be a billionaire,” says Tilson.

As, of course, Ackman still is.

“We are going to make mistakes,” Ackman told investors. “Our mistakes are often going to be much more visible than those of other investment professionals” in one section of the letter. And he also observes that “activist investing requires a thick and calloused skin, and recent press coverage reinforces this point.” 

Sounds like he’s shorting the media, doesn’t it? But this time, I’d venture, he’s far too late to the game.