By Investing.com Staff
Bill Ackman is canceling Pershing Square (NYSE:SQ)'s SPAC, Pershing Square Tontine Holdings, Ltd. (NYSE:PSTH), and returning the $4 billion of capital to shareholders as they have been unable to consummate a suitable transaction.
"We designed PSTH to be the most investor and merger-friendly SPAC at a time when we believed the COVID-19 pandemic would continue to disrupt capital markets providing PSTH with an opportunity to merge with and take public a large capitalization private company that met our investment criteria for business quality, durable growth, and an attractive valuation," Ackman commented in a letter to shareholders. "Two years later, we are returning our $4 billion of capital in trust to shareholders as we have been unable to consummate a transaction that both meets our investment criteria and is executable."
In 2021, Pershing Square Tontine unsuccessfully tried to merge with Universal Music Group (AS:UMG).
"Unfortunately, Vivendi’s structural and legal requirements dictated a transaction structure that was somewhat unconventional for SPACs, and ultimately, one that could not be consummated given concerns raised by the SEC," Ackman commented. "As a result, the board terminated the transaction and assigned its obligation to acquire UMG to the Pershing Square Funds."
Since that time, Ackman said they have been unsuccessful in consummating a deal largely due to the adverse market for SPAC merger transactions which has been driven by: (1) the extremely poor performance of SPACs that have completed deals during the last two years which has damaged market perceptions of going public by merging with a SPAC, (2) the high redemption rates of SPACs which has reduced the capital available for the newly merged company, increased the dilution from the shareholder warrants that remain outstanding, and heightened transaction uncertainty, and (3) risk and uncertainty created by the Investment Company Act litigation brought against PSTH, particularly when coupled with new SPAC rules proposed by the SEC on March 30, 2022.
With the SPAC and IPO market effectively shut today, Ackman said the firm is working diligently to launch Pershing Square SPARC Holdings, Ltd., a privately funded acquisition vehicle which intends to issue publicly traded, long-term warrants called SPARs, which will offer SPAR owners the opportunity to acquire common stock in the newly merged company, the outcome of a business combination between SPARC and a private company.
"We are disappointed that we did not achieve our initial objective of consummating a high-quality transaction for PSTH. We look forward to the opportunity to continue to work on your behalf once SPARC is successfully launched," Ackman concluded.