Should Investors Trust Bill Ackman With This Blank Check IPO?

Banking, finance, and taxes

Published: June 22, 2020 1:06 pm

Pershing Square Tontine Holdings has filed an S-1 form with the U.S. Securities and Exchange Commission (SEC) regarding its initial public offering. The firm is offering a total of 150 million units for $20 apiece. Each unit consists of one share of Class A common stock and one-ninth of a warrant. At this price, the offering is valued up to $3 billion. The company intends to list the common stock on the New York Stock Exchange under the symbol PSTH.

The underwriters for the offering are Citigroup, Jefferies, UBS Investment Bank, CastleOak Securities, Loop Capital Markets, Ramirez, Siebert Williams Shank, Academy Securities, C.L. King and Roberts & Ryan.

This is a newly organized blank check company incorporated in Delaware and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

For those late to the party, this company will basically act as a subsidiary to Bill Ackman’s Pershing Square Capital Management (PSCM), which is more or less acting as the sponsor. PSCM had approximately $10.7 billion in assets under management and $9.3 billion of net assets under management as of June 9, 2020.

Obviously, the management team will be led by Ackman, who will work closely with the PSCM investment team and PSCM in general to pursue its goal as a blank check company.

As for the goal, the company intends to pursue merger opportunities with private, large capitalization, high-quality, growth companies where its ownership in the merged company would generally represent a minority of shares outstanding at the time of the merger.

Note that the gross proceeds of the offering may not be readily available because of New York Stock Exchange rules. Here’s where it gets a little complicated. The proceeds would be deposited into a trust account, with Continental Stock Transfer & Trust acting as trustee, and there are only a couple provisions to pull money out. First, the company can pull money out to pay tax obligations, some of which may be related to the offering. Then the proceeds will be made available if and when the company completes its initial business combinations.

Still, before investing in this company, investors should be asking themselves if they want to hand a blank check to Bill Ackman.