Pershing Square Capital Management founder Bill Ackman said his new special-purpose acquisition company is the “investor-friendly SPAC in the world.”
“What’s new in our structure is that it is the first SPAC where we are not receiving compensation: no management fees, incentive fees … we are not buying cheap stocks. There is literally no compensation for sponsors,” he said Wednesday in CNBC “Box of squawks”.
The fund, called Pershing Square Tontine Holdings, is set to become the largest special-purpose acquisition company, or SPAC, registered when it goes public on Wednesday.
The fund was announced in June and initially set out to raise $ 3 billion in external capital. But in early July, the number rose to $ 4 billion, with Pershing Square Capital investing between an additional $ 1 billion and $ 3 billion, meaning the total value of the vehicle could reach $ 7 billion.
SPACs are also known as blank check companies, as investors save money without knowing when or even what their capital will be used for. They have not always had the best reputation due to traditionally favorable terms for sponsors and managers.
Once the SPAC is made public, the goal is for it to be acquired or merged with a private company, and thus made public. Investors then have the option to become shareholders of the new combined company.
“Our goal is to buy a minority stake in a business, and what I mean by that is that we are going to merge with someone. We will make them public and our shareholders will own 20%, 25%, 30% of the company. We believe that We can make an advantageous deal for our shareholders, truly providing a great opportunity for a company to accelerate its growth, wipe out the balance sheet, and provide capital for investors seeking to exit, “said Ackman.
“We think it is a great structure and a wonderful reception.”
A regulatory filing for the fund said it will target four areas for acquisition: mature unicorns, which are private companies valued at more than $ 1 billion, family-owned companies, large private equity portfolio companies, as well as companies that would. otherwise, go public with a traditional IPO, but that could have been interrupted by the pandemic.
For private companies, SPACs are sometimes a less risky way to go public with an often-accelerated timeline, and without having to go through all of the SEC’s regulatory hurdles.
“I think it is actually a much better process,” Ackman said of SPACs versus IPOs. “It is much better for the issuer, and it is much better for the shareholder because they can make a thoughtful decision that is not rushed by the typical IPO process.”
Amid volatility and a lackluster IPO market, SPACs are growing in popularity. So far this year, they’ve raised more than $ 12 billion, according to Dealogic, directing business flow to exceed the record-breaking $ 13.5 billion in 2019. Notable SPAC acquisitions in 2020 include Nikola and DraftKings as well as Richard Branson’s Virgin Galactic in 2019.
Pershing Square Tontine Holdings’ shares will be listed on the New York Stock Exchange under the symbol PSTH.U.
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