Bill Ackman in an interview with Bloomberg Television on November 1, 2017. Billionaire investor William Ackman, who has raised $4 billion in the largest special purpose acquisition firm (SPAC) ever, said he would return the money to investors if he could not find a suitable target. The company will be offered to the public through a merger.
Christopher Goodney | Bloomberg | Getty Pictures
Billionaire investor William Ackman, who has raised $4 billion in the largest special purpose acquisition firm (SPAC) ever, told investors he would return the money if he could not find a suitable target company to go public through the merger.
The development was a major setback for the leading hedge fund manager, who planned to buy SPAC’s stake in Universal Music Group last year when these investment vehicles were in vogue on Wall Street.
In a letter to shareholders Monday, Ackman highlighted a number of factors hindering efforts to find a viable company to merge his SPAC, including adverse market conditions and strong competition from traditional public offerings (IPOs).
“High-quality and profitable, durable growth companies can often delay their IPO time until market conditions are more favorable, which has limited the universe of high-quality potential deals for PSTH, especially in the last 12 months,” Ackman said. Stock symbol for SPAC.
In July 2020, Pershing Square Tontine raised $4 billion in its initial public offering, attracting prominent investors from hedge fund Baupost Group, Canadian pension fund Ontario Teachers, and mutual fund firm. T. Rowe Price Group.
SPACs, also known as blank check companies, are publicly traded cash shells created by large investors, known as sponsors, for the sole purpose of a merger with a private company. A reverse merger-like process takes the target company public.
SPACs peaked in 2020 and early 2021, helping to generate hundreds of millions of dollars worth of paper money for a number of prominent SPAC creators such as Michael Klein and Chamath Palihapitiya.
However, companies that merged with SPACs over the past year have performed poorly, forcing investors to avoid blank check deals. This, combined with tighter regulatory scrutiny and the downturn in equity markets, effectively shut down the SPAC economy, which was at several billion dollars.
Also, the record-breaking performance of regular IPOs in the United States in 2021 has created competitive challenges for SPAC sponsors like Ackman, as several wealthy startups have chosen to list their stocks on stock exchanges instead along traditional routes.
“The rapid recovery of capital markets and our economy is good for America but unfortunate for PSTH, as it has made the traditional IPO market a strong competitor and a preferred alternative for high-end businesses looking to go public,” Ackman said. Said.
Efforts to acquire 10% stake in Ackman in July last year universal Music, Distributed by the French media conglomerate vivendi, derailed by regulatory hurdles through its SPAC. The U.S. Securities and Exchange Commission contested the deal, and Ackman put the investment in the hedge fund instead.
“While there were potentially actionable transactions for PSTH over the past year, none of them met our investment criteria,” Ackman said. said.
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