March 1, 2021

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Pershing Square ‘taking no compensation’ for new SPAC investment vehicle

Bill Ackman, founder and CEO of Pershing Square Capital Management.

Adam Jeffery | CNBC

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Bill Ackman’s 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, announced in June, targeted $4 billion in outside capital, which was higher than the initial target of $3 billion. Ackman’s hedge fund, Pershing Square Capital, will invest an additional $1 billion to $3 billion, meaning the vehicle’s total value could reach $7 billion.

Ackman said Wednesday on CNBC’s “Squawk Box” that his new investment vehicle is the “most investor friendly SPAC in the world.”

“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,” he said.

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. 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.

For the private company, it’s 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. Amid volatility and a lackluster IPO market, SPACs are growing in popularity.

“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 advantage 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.

Shares will trade on the New York Stock Exchange, under the ticker PSTH.U.

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