Billionaire hedge-fund manager Bill Eckman’s so-called “Blank Check” company went public on Wednesday after it acquired an undefined company for more than $ 4 billion in kitty, and has two years to choose .
Pershing Square Tontin Holdings Ltd. PSTH.UT,
There is a Special Purpose Acquisition Company (SPAC), formed to buy a private company and make it public through similar acquisitions of reverse mergers. The company raised $ 4 billion, as it sold 200 million shares in its initial public offering, which was valued at $ 20 a share.
The company’s stock began trading on the New York Stock Exchange on Wednesday morning, with the first trading at $ 21.10, or 5.5% above the IPO price. It has climbed steadily since climbing 7.9% in afternoon trading.
Ekman has built this war chest at a time, as he said in an interview at CNBC on Wednesday that he is “long-term bullish” on the US and the stock market, though he was bearish on highly indebted companies.
See: Ekman says that he is ‘long-term bullish’ on the stock market but ‘slowdown’ on highly indebted companies
SPACs are shell companies without an operating business, created solely to purchase private companies, or act as a backdoor to a company without the usual regulatory and pomp of Wall Street, and cost, a Traditional IPO. Read more about ‘blank check’ companies.
Renaissance Capital, a provider of institutional research and IPO exchange-traded funds, said it does not include SPAC in its IPO because they are not operating companies. Investors should therefore be cautious, as SPAC cannot be given value, other than that for cash that occurs after an acquisition.
“SPACs can be extremely attractive to founders, who typically take a healthy share of equity at nominal value, as well as consultants, lawyers and bankers to IPOs involved with IPOs and final M&A deals,” Matthew Kennedy , Senior strategist said Renaissance Capital. “However, it is worth noting that SPACs are a mixed bag for long-term investors.”
However, in some “high-flying” companies that have gone public through SPAC, it has outperformed IPOs and the broader market share, such as Nikola Corp NKLA.
DKNG & DraftKings Inc.,
Kennedy said that the majority of SPAC had completed business acquisitions this year (59%), a return issue with a 12% drop. Last year was the same.
As the market for SPACs continues to swell, with $ 16.8 billion SPACs raised this year even before Pershing Square Tontine surpasses the already public record for $ 12.1 billion of SPAC income, space matures Has started happening, Kennedy said.
“The deals of large banks are becoming increasingly scarce. More institutional long-term investors are buying SPX. Higher quality IPO candidates are considering going public through SPAC, ”Kennedy said. “And we are also encouraged by the structure of Perseng Square Tontin, where sponsors will not make money unless public investors do.”
Pershing Square Tontine is sponsored by Pershing Square TH Sponsor LLC, wholly owned by three investment funds – Pershing Square Holdings Ltd., Pershing Square LP and Pershing Square International Ltd – all of which are Ackhanman’s hedge fund Pershing Square Capital Are managed by Management. LP Ekman is also the President and Chief Executive Officer of SPAC.
Citigroup, Jefferies and UBS Investment Bank are the joint bookmarking managers of the IPO. Included in this are a host of other bankers, including co-chief managers of IPO CastleOak Securities LP, Loop Capital Markets, Ramirez & Company Inc. and Siebert Williams Shank.
In connection with the IPO, Pershing Square funds have committed to purchase equity units of at least $ 1 billion, each of which includes a portion of common stock and a third of the warrant to purchase stock, at $ 20 per unit On the price. The funds will have the right to purchase an additional $ 2 billion of equity units.
This gives SPAC a minimum of $ 5 billion in cash equity capital to purchase. Although many other funds of similar or larger size formed to acquire often buy 100% or majority interests in many companies, Pershing Square Tontin said it plans to merge with just one private company and make it public. , Through a deal that gives it only one minority interest in the new public company.
When SPAC revealed its intention to go public in June, it said it plans to raise $ 3.45 billion by offering 172.5 million shares at $ 20 a share. At that time, as with SPACs, it is said that if a business combination was not completed within 24 months or 30 months, if the letter of intent is executed, it will be paid to the owners through cash payments Will return 100% share. .
Ekman has chosen a stellar year for the IPO to make Purslang Square Tontin public. Renaissance IPO ETF IPO,
, The largest IPO completed in the last two years, has gone up 39% year to date, while the S&P 500 Index SPX,
There is an increase of 1.1%.
On the way to increase his fortune, Ekman is known to have made some investments that have changed badly, such as his bearish bet on Herbalife Nutrition Ltd. HLF.
And Valeant Pharmaceuticals International Corp. Fast bets on, now Bausch Health Companies Inc. Is a subsidiary of BHC.
It will be seen, over two years, whether he buys with his SPAC money, can make investors a bit richer.