Ackman Returning $4BN To Investors In Largest Ever SPAC After Failing To Find A Deal

It came like a lion, with days of non-stop investor fanfare constant TV coverage; it’s leaving like a shorn lamb.

Two years after unleashing the largest ever blank check company in history, billionaire investor and CNBC drama queen, Bill Ackman, told investors that he is returning their $4 billion after failing to consummate a merger deal.

Pershing Square Tontine Holdings’ efforts to find a target company were thwarted in part by what Ackman said was the unexpected recovery of capital markets during the coronavirus pandemic, according to a statement late on Monday.

“We have been unable to consummate a transaction that both meets our investment criteria and is executable” Ackman said, noting that “while there were transactions that were potentially actionable for PSTH during the past year, none of them met our investment criteria” due to  an “adverse market for SPAC merger transactions.

“The rapid recovery of the capital markets and our economy were good for America but unfortunate for PSTH, as it made the conventional IPO market a strong competitor and a preferred alternative for high-quality businesses seeking to go public,” Ackman said, referring to the blank-check firm by its trading symbol.

In other words, Ackman used the Buffett excuse: “everything got too expensive for us to invest.” Which of course doesn’t explain why the billionaire didn’t look for opportunities now that stocks are more than 20% lower (and in many cases 50% or more). What explains it, is that with market sentiment dismal, it would have been difficult to find buyers into any new investment that was predicted on exponential growth as most SPAC do, at a time when the US economy is in a recession and flirting with depression.

Ackman’s Tontine Holdings in July 2020 helped catapult special purpose acquisition companies, or SPACs, to record levels as the pandemic took hold, which we said at the time was the surest indicator of a market bubble similar to what happened in early 2008 just before the credit bubble burst. Since the start of that year, more than 1,200 SPACs have raised in excess of $271 billion in initial public offerings, almost three times the volume of all previous years combined, according to data compiled by Bloomberg.

As Bloomberg reminds us, a 2021 effort by Ackman to buy a 10% stake in Universal Music from Vivendi with a portion of the SPAC’s funds was shot down by regulators. Early discussion with companies including Airbnb and Stripe also failed to yield a deal.

Ackman also said in Monday’s statement that he’s still “working diligently to launch” a new type of privately funded acquisition vehicle, Pershing Square SPARC Holdings Ltd., that will issue publicly traded warrants allowing holders to acquire stock in a newly merged company, to wit:

“With the SPAC and IPO market effectively shut today, now is a highly opportunistic investment environment for a public acquisition vehicle which does not suffer from the negative reputation of SPACs. With this in mind, as we have previously explained, we are 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. The SPARC structure has many favorable attributes compared with conventional SPACs that should increase the probability a transaction can be executed on favorable terms.”

“We intend to distribute SPARs to PSTH security holders who own either Class A Common Stock (ticker: PSTH) or warrants (ticker: PSTH.WS) as of the close of business on July 25, 2022 (the last date such instruments are redeemed or cancelled): ½ of a SPAR for each share of common stock and one SPAR for each warrant. The timing of the SPAR distribution will be determined by reference to the date SPARC’s registration statement becomes effective, which we would not expect to occur until Fall 2022.”