Activist investor Bill Ackman (L), chief executive of Pershing Square Capital, speaks with David Weinreb, CEO of Howard Hughes Corp. on the floor of the New York Stock Exchange November 10, 2015. REUTERS/Brendan McDermid

BOSTON (Reuters) - Shares in Howard Hughes Corp HHC.N dropped more than 3 percent on Wednesday after billionaire investor William Ackman, who chairs the real estate company's board and called it an attractive buy in May, said his firm would sell 2.5 million shares.

Ackman, whose hedge fund Pershing Square Capital Management is Howard Hughes' biggest shareholder, is trimming the firm's holdings for tax reasons and insists he hasn't soured on one of his hedge fund's longest-held investments. He needs to make the move in order to invest some $300 million of his own money into Pershing Square Holdings PSH.AS, his publicly listed portfolio that trades like a closed-end fund.

But investors’ reaction to the news that he is slimming down his Howard Hughes stake illustrates just how much sway the activist investor has in the stock market even after three straight years of losses at his $9.3 billion firm.

In afternoon trading Howard Hughes Corp’s stock stood at $128.52, off 3.25 percent. The company, whose real estate assets include master planned communities like Summerlin near Las Vegas and The Woodlands near Houston, helped performance at Ackman’s firm in the first three quarters of 2017, the fund manager told clients.

He announced the move -- Pershing Square Capital Management will still own a 17.6 percent economic stake, down from 23.4 percent -- as he tries to fix his lagging portfolio, Pershing Square Holdings. After months of buying back more than $40 million worth of Pershing Square Holdings shares, the shares were still trading roughly 20 percent below their net asset value, marking another disappointment for Ackman.

Sluggish returns -- the Pershing Square Holdings portfolio lost 4 percent in 2017 while Pershing Square International lost roughly 1.5 percent - coupled with investor defections and concerns that Ackman’s investment ideas aren’t as powerful as they once were, are prompting new moves, including the planned $300 million cash infusion from Ackman and senior associates.

While the move hurt Howard Hughes’ stock, it helped Pershing Square Holdings. Its Amsterdam-listed shares rose 3.6 percent.

The cash infusion from Ackman, whose net worth is estimated at $1.4 billion by Forbes, is aimed to “assist in reducing the discount to net asset value at which PSH’s public shares currently trade,” the release said.

In May 2017, when Ackman tried to convince other investors to bet on Howard Hughes, he said the company wasn’t well known and its stock price was inexpensive.