Bill Ackman just took a massive stake in Chipotle and wants to shake things up

Akin Oyedele

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Bill Ackman wants to shake things up at Chipotle.

In a regulatory filing on Tuesday, his hedge fund, Pershing Square, disclosed a 9.9% stake in the fast-casual chain and said it is seeking talks with the company.

Shares of Chipotle jumped following the news. Ackman's stake makes him the second largest shareholder in the company.

"The Reporting Persons (Pershing Square) believe that the Issuer's Common Stock is undervalued and is an attractive investment," the 13D filing stated.

A 13D filing is typically used when an investor takes an activist stance to demand changes. These can range from increased dividends or share buybacks to management shakeups.

Ackman intends to enter discussions with Chipotle's management on the company's business, operations, cost structure, assets, and other components, according to the filing.

Pershing Square has targeted companies including JC Penney and Canadian Pacific Railway. Ackman took an activist short position in Herbalife in 2012 — betting the shares would decline while alleging that the company operated like a pyramid scheme.

Chipotle has fought to win customers back since outbreaks of E. coli and norovirus were linked to its restaurants late last year.

The company's shares jumped by as much as 8% in after-hours trading. They slid 42% in the year through Tuesday's market close, slammed by investors' concerns about food safety.

Chipotle reported its first quarterly loss ever in April and has used a loyalty program and free food to try to lure customers back.

"We welcome their investment, and appreciate the confidence they've expressed in our brand, differentiated offering, visionary leadership and strong growth opportunities," said Chris Arnold, Chipotle's spokesman, in a statement to Business Insider. The company learned of Pershing Square's investment on Tuesday, Arnold said.

Pershing Square declined to comment.