Billionaire investor Bill Ackman seeks to ‘marry a unicorn’ with record SPAC

The massive new “blank check” company, run by billionaire activist investor Bill Ackman, is looking to “marry a unicorn.”

Pershing Square’s Tontine Holdings (PSTH.U) raised a staggering $ 4 billion from investors on Wednesday in its unprecedented debut on the New York Stock Exchange. Investors applauded the shares, which ended the first day of trading with a 6.5% increase, closing at $ 21.30 per share.

It is the latest in a series of special purpose acquisition companies (SPAC). These blank check companies have been around for years, but they got more after bringing companies like DraftKings (DKNG), Nikola (NKLA), and Virgin Galactic (SPCE) to public markets, leaving aside the traditional initial public offering (IPO). route.

“Our thesis is to have a $ 5 billion cash pile in a public company; it’s our own version of a unicorn. It is a one-of-a-kind entity,” Ackman told Yahoo Finance on Wednesday, after Tontine’s float .

“So, we are looking to marry a unicorn. So we are deluding ourselves to be the most attractive partner possible, “he added.

At one point, the company’s model of blank checks was associated with high risk, in a way that drew both regulatory scrutiny and some controversy.

However, Ackman defended the idea of ​​a SPAC as “a good one, which is: collecting a cash deposit, putting it on a stock exchange, and then issuing securities to go public with a private company.”

He added: “It is a much more efficient process, a much less risky process for private companies.”

The 54-year-old investor explained that a typical initial public offering (IPO) could take several months, during which companies are “under enormous scrutiny” that can distract the company’s daily operations.

“The alternative with a SPAC is that we work quietly with the majority of seniors in the company. We learn about the business. We do our due diligence. We enter into a transaction, and the first press release is ‘You’re done,'” Ackman said, noting that it minimizes the distraction and uncertainty that comes with an IPO.

Plus

This is not Ackman’s first foray into the SPAC world.

In 2012, he used his shell company Justice Holdings to buy Burger King and return the burger chain to public markets. Today, Burger King is part of Restaurant Brands International (QSR), Pershing Square’s largest shareholding, according to the firm’s latest regulatory filing.

In the coming months, Tontine Holdings will look at the main areas to look for a deal, including examining companies that may have been discouraged from taking the IPO route. Those have either been affected by recent market volatility, or are venture capital-backed companies with “significant scale, market share, competitive dominance, and cash flow” that Ackman calls “mature unicorns.”

The latter is “a business that has really attractive economic characteristics: high growth, predictability, they may be investing to gain more market share, so it is not generating much cash today, but it is building an excellent market position in a business that we understand, we like and using technology will be an important part ”, he explained.

The other two areas for a potential transaction include privately owned or family-owned businesses.

“COVID has an impact on almost every private equity business. We are a $ 5 billion instant deleveraging IPO event. And the same is true for a family business,” added Ackman.

Ackman is best known as an activist investor who captures large publicly traded companies and pushes for change. Its investment philosophy has long focused on dominant, simple, predictable, cash flow generating companies with high barriers to entry.

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This thesis has been “reinforced” by the severity of the COVID-19 pandemic that has affected businesses and the economy.

“The world is an uncertain place. It was an uncertain place before we had a pandemic. Unfortunately, it will be an uncertain place after we overcome this pandemic,” said Ackman.

As such, the new cash deposit company will look for businesses “that can stand the test of time” and that are “super durable.”

He added: “Our job is to find out which is the super high-quality, durable company that the stock market may close, pandemics may occur, and on the other hand, we own a more valuable company.”

So far, it’s a strategy that’s paying off for Ackman’s hedge fund business. Pershing Square Capital’s nearly $ 11 billion publicly traded vehicle, Pershing Square Holdings, was up 34.7% as of Tuesday, far outperforming the overall market.

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Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.