Text size
William Ackman
Bryan Bedder / Getty Images for The New York Times
A special-purpose acquisition company, or SPAC, sponsored by Bill Ackman’s Pershing Square Capital Management, made its debut on the New York Stock Exchange on Wednesday in the largest initial public offering of blank checks. The offering includes 200 million units at $ 20 each, raising $ 4 billion in profit. Each unit consists of one common share and one ninth of a warrant, exercisable at $ 23. Trading began at $ 21.10.
SPACs raise money from OPI investors, and then the cash is deposited into a trust until the sponsors agree to a merger with an operating business. When companies combine, SPAC shares become shares in the target, which is made public in the process. The market has seen an avalanche of IPOs and SPAC offerings in 2020, and the participation of high-profile players. SPAC’s mergers have brought some of the most popular stocks of 2020 to market, including Nikola (ticker: NKLA), DraftKings (DKNG) and Virgin Galactic Holdings (SPCE).
Ackman’s SPAC, Pershing Square Tontine Holdings, will initially be traded under the ticker PSTH.U. Within a few months, the units will be divided and the shares and warrants can be traded separately, under the symbols PSTH and PSTH.WS, respectively.
SPAC will have even more cash at its disposal to achieve possible merger targets in the next two years. Pershing Square also has an advance purchase agreement to acquire between $ 1 billion and $ 3 billion of additional units at the time of an eventual combination. That means Ackman, who is CEO of SPAC, could have up to $ 7 billion at his disposal.
Pershing Square Tontine Holdings intends to seek a minority position in a “private, large-cap, high-quality and growing company,” according to its IPO filings. That includes “mature unicorns,” which are privately owned and possibly VC-backed tech companies that have skyrocketed to high valuations and passed the peak growth stage of their losses. Some have suggested Airbnb and Palantir as possible targets in that mold. Large family businesses are also potential targets. Bloomberg LP has been the most commonly cited name there.
In addition to the massive size of Pershing Square Tontine Holdings, the offering includes several innovations in terms of SPAC. By convention, SPAC units tend to IPOs at $ 10 each, and include a common stock and a fraction of an exercise order exercisable at $ 11.50, often half or as low as a fifth, depending on the quality of the sponsor. .
Ackman’s SPAC includes a “tontine” structure for his arrest warrants, which refers to a type of annuity conceived in the 17th century. All investors share the tontinas group’s income, and each individual’s share grows as others pass away. In addition to the 22,222,222 warrants issued at the time of the IPO of Pershing Square Tontine Holdings, another 44,444,444 warrants will be distributed to shareholders who choose to participate in the proposed settlement.
At the time of a SPAC business combination, common shares can be exchanged for a proportional share of the trust of a SPAC. That can sometimes leave SPACs without enough cash to complete the agreed mergers. By including the general terms for its warrants, Pershing Square Tontine Holdings offers an additional incentive for shareholders not to exchange their shares. He believes that will give him better bargaining power with potential goals and lead to a better deal.
IPO investors certainly seem interested. The now $ 4 billion offer was expanded after the first submission to a record $ 3 billion last month.
Write to Nicholas Jasinski at [email protected]
.
