Bill Ackman during a Bloomberg Television interview on November 1, 2017. Billionaire investor William Ackman, who had raised $ 4 billion in the largest special-purpose acquisition company (SPAC) of all time, told investors he would return the sum after failing to find a suitable target. the company to announce through a merger.
Christopher Goodney | Bloomberg | Getty pictures
Billionaire investor William Ackman, who had raised $ 4 billion in the largest specialty acquisition company (SPAC) of all time, told investors he would return the sum after not finding a suitable target company to announce through a merger.
The development is a major setback for the prominent hedge fund manager who had originally planned for SPAC to take a stake in Universal Music Group last year when these investment companies were furious on Wall Street.
In a letter sent to shareholders on Monday, Ackman highlighted a number of factors, including unfavorable market conditions and strong competition from traditional IPOs, which hindered his attempt to find a suitable company to merge his SPAC with.
“High-quality and profitable companies with lasting growth can generally delay the timing of listing until market conditions are more favorable, which has limited the universe of possible high-quality deals for PSTH, especially during the last 1[ads1]2 months,” Ackman said, referring to ticker symbol for his SPAC.
In July 2020, Pershing Square Tontine raised $ 4 billion in its listed issue and proposed to prominent investors ranging from the hedge fund Baupost Group, the Canadian pension fund Ontario Teachers and the mutual fund company T. Rowe Price Group.
SPACs, also known as blank-check companies, are listed cash shells created by large investors – known as sponsors – for the sole purpose of merging with a private company. The process, which is similar to a reverse merger, takes the target company public.
SPACs peaked during 2020 and early 2021, helping to raise paper winnings worth hundreds of millions of dollars for a number of prominent SPAC creators such as Michael Klein and Chamath Palihapitiya.
Over the past year, however, companies that have merged with SPACs have performed poorly, forcing investors to reject blank check agreements. This, combined with stricter regulatory controls and a downturn in the stock markets, has virtually shut down the SPAC economy, with billions of dollars at stake.
In addition, the record-breaking performance of regular US IPOs in 2021 presented competitive challenges for SPAC sponsors such as Ackman, as several highly valued startups chose to list their shares on stock exchanges through traditional routes instead.
“The rapid recovery of our capital markets and economy was good for America, but unfortunate for PSTH, as it made the conventional listing market a strong competitor and a preferred option for high-quality companies looking to go public,” said Ackman.
In July last year, Ackman’s efforts to take a 10% stake in Universal Music, which was spun off by the French media conglomerate Vivendi, were derailed due to regulatory obstacles. The US Securities and Exchange Commission protested the deal and Ackman put the investment in his hedge fund instead.
“Although there were transactions that could potentially be traded for PSTH over the past year, none of them met our investment criteria,” said Ackman.