Markets

Bill Ackman: Pershing Square 'taking no compensation' for new SPAC investment vehicle

Key Points
  • Bill Ackman's Pershing Square Tontine Holdings is poised to become the largest special purpose acquisition company on record when it begins trading on Wednesday.
  • "What's new in our structure is that we're taking no compensation: no management fees, incentive fees ... we're not buying cheap stock. There's literally no compensation to the sponsors," Ackman said Wednesday.
  • SPACs are growing in popularity: they've raised more than $12 billion this year, putting the dealflow on track to surpass 2019's record total of $13.5 billion
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Bill Ackman: Pershing Square ‘taking no compensation’ for new SPAC investment vehicle

Pershing Square Capital Management founder Bill Ackman said that his new special purpose acquisition company is the "most investor friendly SPAC in the world."

"What's new in our structure is it's the first SPAC where we're taking no compensation: no management fees, incentive fees ... we're not buying cheap stock. There's literally no compensation to the sponsors," he said Wednesday on CNBC's "Squawk Box."

The fund, called Pershing Square Tontine Holdings is poised to become the largest special purpose acquisition company, or SPAC, on record when it begins trading on Wednesday. 

The fund was announced in June, and initially set out to raise $3 billion in outside capital. But earlier in July the number was raised to $4 billion, with Pershing Square Capital investing an additional $1 billion to $3 billion, meaning the vehicle's total value could reach $7 billion.

SPACs are also known as blank-check companies, since investors fork over money without knowing when, or even what for, their capital will be used. They haven't always had the best reputation due to traditionally favorable terms for the sponsors and managers.

Once the SPAC goes public, the goal is then for it to acquire or merge with a private company, thereby taking it public. Investors then have the option to become shareholders in the newly combined company.

"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. We're going to take them public and our shareholders will own 20%, 25%, 30% of the company. We believe we can make an advantageous deal for our shareholders, really bringing a great opportunity for a company to accelerate its growth, deleverage the balance sheet, and provide capital for investors seeking to make an exit," Ackman said.

"We think it's a great structure and a wonderful reception," he added.

A regulatory filing for the fund said it will target four areas for its acquisition: mature unicorns, which are privately held companies with a valuation in excess of $1 billion, family-owned businesses, large private equity portfolio companies, as well as companies that would otherwise go public through a traditional IPO, but that might have experienced disruptions thanks to the pandemic.

For the private company, SPACs are sometimes a less risky way to go public on an often accelerated timeline, and without having to jump through all of the SEC's regulatory hoops.

"I think it's actually a much better process," Ackman said of SPACs versus IPOs. "It's much better for the issuer, and it's much better for the shareholder because they get to make a thoughtful decision that's 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 have raised more than $12 billion, according to Dealogic, putting the dealflow on track to surpass 2019's record total of $13.5 billion. Notable SPAC acquisitions in 2020 include Nikola and DraftKings, as well as Richard Branson's Virgin Galactic in 2019.

Shares of Pershing Square Tontine Holdings will trade on the New York Stock Exchange, under the ticker PSTH.U.

VIDEO4:2104:21
Two underwriters in Bill Ackman's SPAC discuss his deal and the boom of 'blank check' companies

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