Key Points

• Bill Ackman’s $25 billion IPO for his hedge fund flopped, scaling down to $2 billion with minimal interest.
• Investors were likely deterred by the fund’s concentrated holdings, leading to fading buzz.
• The IPO is likely to be a non-event, far from its original ambitious goal.
• Also: Smart investors are looking ahead and loading up on The Next Nvidia

Lee and Doug discuss the surprising failure of hedge fund manager Bill Ackman’s attempt to launch an IPO for his company, Pershing Square, in a closed-end ETF format. Initially, there was significant buzz, with plans to raise $25 billion, but interest quickly dwindled, leading to a reduction in the target to $2 billion. They speculate on the reasons behind the lack of investor interest, despite Ackman’s high profile and success in the industry. They express surprise at the outcome, noting that Ackman may still find a way to get the smaller $2 billion IPO done, but the grander vision seems unlikely to materialize. They conclude that unless something dramatic changes, this story may end as a non-event.

Transcript:

So I don’t know that I’ve ever seen anything quite like this, but one of the biggest hedge fund names in the world tried to have an IPO of his company.

In a closed-end format?

Correct. ETF format.

So tell me how that worked.

Well, you know, when Bill Ackman from Pershing Square first came out and there was a lot of hot buzz on like, oh, public and it’s going to be big.

And, you know, the Pershing Square portfolio, if you think Buffett’s, you know, compacted, you should see Pershing Square.

I think his actual holdings is like eight companies.

And I think for the ETF, there was going to be 13.

And it’s things like Chipotle and like Howard Hughes and kind of unusual names like that.

And it’s been really a surprise because at first they were going to raise $25 billion.

Then they scaled it down to $2 billion.

And now it’s like, well, we’ll get back to you on this.

What happened?

If you want to launch an IPO, the first thing you want is everybody to know you’re going to do it.

Now, this guy is so famous that…

The minute he talked about it, Wall Street Journal, CNBC, everybody had the story.

Everybody.

If you’re going to do an IPO, the first thing you want is awareness.

I think from family offices and big institutional investors, I think he did like $10 billion immediately.

Now, I don’t know if that money will go back to those investors or they’re going to hold it and put it in the regular Pershing Square until…

I mean, Pershing Square has traded publicly in Europe for some time.

And it’ll be interesting to see what happens with that initial like funding round that was like $10 billion.

It’ll be interesting to see, is that all going to go back in or what?

Now, so people understand, why did he want to do this in the first place?

Let’s say he got the $25 billion. Why?

Well, the nice thing about that kind of capital is you’re taking a point or 50 basis points in fees, and it’s just money that sits there forever.

And Ackman doesn’t whip that around all that much.

And he was more known for years as the activist investor that used to like to piss off Carl Icahn and people like that.

But I think maybe people started looking at it and saying, if it’s only going to be 13 holdings, why don’t I just go out and buy them?

I can find out what they are.

Right. You could find out what they are.

Yeah.

So I don’t know why the buzz went away so fast because Ackman’s well-respected.

He’s very well-respected.

And one of the highest profile guys on Wall Street now.

He’s, you know, he’s 58 years old.

He’s, and he’s the kind of guy you always recognize. He’s got snow white hair and…

It has for years.

And I’m a little surprised.

And I’ve been trying to look for reasons that are out there that state like, Hey, you know, here’s why it, you know, went sideways or here’s why the interest fell off.

Or, you know, I get the sense that, you know, typically, you know, how IPOs are, you know, you’re, you’re the banks that are going to be in it and go out and start, okay, give me your order, give me your order.

And then they were going back to Ackman going, we don’t have any orders or we don’t have any big orders.

I don’t see what’s going to change this because like you, I scoured the earth to try to find out why you had almost no takers.

So there’s something going on that you and I don’t see.

I don’t think it’s because it’s a choppy market and you don’t want to come out with your IPO.

If you take a look at what they were offering, it’s not like you were trying to come out with some new tech product IPO.

So I don’t get it.

No, I don’t either.

And again, you take the retail investor out of all of this.

Where’s the big money? Come on, big money.

Well, you know, didn’t you come in?

And I think they were expecting that the retail exposure could be higher.

But again, it was going to be priced at $50 a share.

And so, you know, if you’re a retail investor, well, you know…

You can’t get a lot of leverage on a $50 ETF.

No, you can’t get a lot of leverage.

I would say I’d like to come back to this, but we’re not going to come back to it if nothing happens.

I think there’s a fairly good chance nothing’s going to happen.

He’s pretty shrewd, Doug.

I think he’ll find a way maybe to get it done at the $2 billion level, but the grandiose idea is of $25 billion.

No way.

Yeah.

We’re not going to come back to this at all.

OK.

Unless, listen, if something happens and he gets more than people think, but I think this is either dead or when it happens, it’s literally like a tree falling and there’s nobody else around.

Yeah.

Yeah.

It’ll be a non-event, which is surprising given his stature.

Yeah.

Yeah.

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