Billionaire hedgie Bill Ackman and his Pershing Square Tontine Holdings plan to earmark employee-owned and family-controlled businesses for a possible merger. Ackman previously suggested his special-purpose acquisition company [SPAC] was keeping tabs on “mature unicorns” and “high-quality, venture-backed businesses.”
The Pershing Square Capital [$PSTH] pioneer decided to reign in his SPAC’s size in order to more effectively take a minority stake in a large firm. If Billy raises too much cash with the vehicle, it would dissipate the pool of potential acquisition targets. Seeking a minority stake could also yield Billy a better price.
Ackman intimated that he’s been shopping companies within the $10 billion to $15 billion window. Bloomberg reported in early September that had his sights on a merger with Airbnb, but the company turned down the offer in early stages. Airbnb will IPO tomorrow, December 10, 2020. [Airbnb IPO: The Hype is Real]
Pershing Square Tontine caused a stir in the SPAC space with its July debut. The firm raised $4 billion with its IPO, tallying a new SPAC record and a sign of Wall Street’s obsession with the voguish investment vehicles. Thus far, over $53 billion has been raised across 138 SPAC IPOs. Last year saw only $13.6 billion raised across 59 deals. The average size of SPAC IPOs climbed to $388 million this year from $230 million in 2019.
SPACs have recently drawn in long-term investors, though historically, hedgies eagerly bought SPAC units at $10, sold the common shares for about the same price, and pocketed the warrant for a budding upside at an acquisition. SPAC activity has trended higher for years, but high-profile success stories like Virgin Galactic [$SPCE] DraftKings [$DKNG], and Nikola [$NKLA] have been a driver behind some of the recent frenzy.
SPAC proponents claim that a negotiated M&A deal is safer than the IPO process, but these deals also reinforce the idea that SPACs can take public a unique set of quality assets, which include moonshot companies or high-profile names that traditional IPO investors might normally stay away from.
$PSTH touched it’s all time high of $27 on November 30, 2020. Today, it’s trading at $25