Venture Capital: Ackman With $7B War Chest for Mature Unicorn

July 23, 2020 | News, Venture Capital

Ackman’s record-breaking Special Purpose Acquisition Company (SPAC), a.k.a “blank cheque company,” listed Wednesday.

Bill Ackman’s Pershing Square Tontine Holdings Ltd (NYSE: PSTH.U) SPAC raised a humongous $4 billion in its IPO on Wednesday – the largest ever for a SPAC. The company sold 200 million units at $20 each, which closed the day’s trading at $21.30, up 6.50% on the IPO price. Ackman is committed to investing up to another $3 billion in the blank cheque company, bringing its investible war chest to $7 billion. (Markets Insider)

Pershing Square Tontine Holdings Ltd

Typically a SPAC or blank cheque company issues an IPO to raise money for a suitable acquisition. The money sits in a trust earning interest until the company identifies a suitable, usually private and unlisted, target. The two entities then merge and the SPAC shares then exchange for shares in the acquired company. In the process, the private company goes public.

Ackman, who is CEO of PSTH, made it clear in the IPO filings about the kind of target business that would make the cut. These would be private, large capitalization, high-quality, VC-funded growth companies, often referred to as “mature unicorns.”

Moreover, apart from its sheer size, PSTH is a standout SPAC because Pershing Square is taking no compensation. “We created the most investor-friendly SPAC in the world,” Ackman said to CNBC.

What’s in it for the target company

On the CNBC interview, Ackman spelled out the benefits for a business going public via PSTH.

  • No effort or expense needed on roadshows
  • The IPO would be much quicker
  • There would be full clarity on how much money would be received, in advance
  • Most importantly, it’s an easier process from the point of view of regulatory hurdles

What Ackman is looking for

In a statement, PSTH said that at a minimum of $5 billion, it would be “one of the largest sources of cash equity capital for a private, single-company, minority investment in the world.”

“Our goal is to buy a minority interest in a business, and what I mean by that is we’re going to merge with someone,” clarified Ackman to CNBC. “We’re going to take them public and our shareholders will own 20%, 25%, 30% of the company.”

Related Story:   Bill Ackman Calls on U.S. Government to “Be Like Buffett”

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