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) in history, told investors that would return the sum after failing to find a suitable target. company to go public through a merger.
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Billionaire investor William Ackman, who had raised $4bn in the world’s largest special purpose acquisition company (SPAC), told investors he would pay the sum back after failing to find a suitable target company for it. go public through a merger.
The development is a major setback for the prominent hedge fund manager who had initially planned for SPAC to take a stake in Universal Music Group last year when such investment vehicles were all the rage on Wall Street.
In a letter sent to shareholders on Monday, Ackman highlighted numerous factors, including adverse market conditions and strong competition from traditional public offerings (IPOs), that thwarted his efforts to find a suitable company to merge his SPAC.
“High-quality, profitable, durable growth companies can generally postpone their time to go public until market conditions are more favourable, which has limited the universe of potential high-quality deals for PSTH, particularly over the past 12 months.” Ackman said, referring to the ticker symbol for his SPAC.
In July 2020, Pershing Square Tontine raised $4 billion in its initial public offering and attracted prominent investors ranging from hedge fund Baupost Group, Canadian pension fund Ontario Teachers and mutual fund company. T. Rowe Price Group.
SPACs, also known as blank check companies, are publicly traded cash deposits 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 generate hundreds of millions of dollars worth of paper profits for several prominent SPAC creators like Michael Klein and Chamath Palihapitiya.
However, over the past year, companies that merged with SPACs have performed poorly, forcing investors to avoid deals with blank checks. That, along with tighter regulatory scrutiny and a downturn in the stock markets have all but shut down the SPAC economy, with several billion dollars at stake.
Additionally, the record-setting performance of regular IPOs in the United States in 2021 posed competitive challenges for SPAC backers like Ackman, as a number of highly valued startups opted to list their shares on exchanges through traditional routes.
“The rapid recovery of the capital markets and our economy was good for the United States but unfortunate for PSTH, as it made the conventional IPO market a strong competitor and a preferred alternative for high-quality companies seeking to go public” Ackman said.
In July of last year, Ackman’s efforts to acquire a 10% stake in world music, which was being spun off by the French media conglomerate lived, through its SPAC were derailed due to regulatory hurdles. The US Securities and Exchange Commission opposed the deal, and Ackman instead put the investment in his hedge fund.
“While there were transactions that were potentially actionable for PSTH over the past year, none of them met our investment criteria,” Ackman said.
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