Bill Ackman has said he is prepared to return the $ 4 billion in cash his special purpose acquisition company, or SPAC, has collected from investors if regulators approve a new type of investment vehicle.
The billionaire hedge fund manager said in a letter to investors on Thursday
Pershing Square Tontine Holdings
(ticker: PSTH) —son’s PSPAC — that a recent lawsuit affected the ability of the blank check company to conduct a proper merger transaction.
“The nature of the lawsuit and our legal system make it unlikely that it can be resolved in the short term,” Ackman said. “While we have worked diligently to identify and close a transaction and have entered into discussions with potential merger candidates, our ability to complete a transaction on time has been compromised by the lawsuit.”
Pershing Square Tontine Holdings has approximately 11 months to complete a transaction, and another six months to complete the transaction, but this could be extended up to six months with the consent of PSPC shareholders.
Read also : Ackman defers lawsuit against PSPC
Meanwhile, Ackman is waiting for the Securities and Exchange Commission to approve his acquisition rights firm, or SPARC. A SPARC would allow Ackman to enter into deals without actually owning shareholder capital and would not involve the same deal execution time as a SPAC.
Assuming that SPARC, Pershing Square SPARC Holdings, is approved by the SEC before PSTH closes a transaction, Ackman said he was prepared to seek investor approval to return the SPAC cash. PSTH investors would receive $ 20 in cash and one SPARC warrant for each PSTH share they hold, he said.
PSPCs are created, often by prominent figures like Ackman, to go public as blank check entities, raising money from investors before combining with existing business entities through a process of reverse fusion.
The lawsuit in question argues that PSTH is in fact an “investment company” because it invested the proceeds of its initial public offering in securities. As such, the plaintiffs allege that the group illegally charged investors “hundreds of millions of dollars in compensation”.
More: Bill Ackman’s SPAC drops deal to buy 10% stake in Universal Music
Ackman called the lawsuit “baseless,” noting that the securities referenced are short-term treasury bills and money market funds that own treasury bills. Buying these assets is “something that all SPACs do because they preserve the funds necessary to complete their initial business combinations,” he said.
The activist investor and pioneer of the PSPC craze that has gripped the markets since last year also warned that the lawsuit could potentially change the landscape for blank check companies in the near term.
“Because the basic issues raised here apply to every PSPC, a successful claim would imply that every PSPC may also be an illegal investment company,” Ackman said. “As a result, the lawsuit may have a chilling effect on the ability of other PSPCs to complete merger transactions or engage in IPOs until the litigation is resolved in PSTH’s favor.”
PSTH last month abandoned plans to buy a 10% stake in Universal Music Group, the label owned by the French media giant.
(VIV.France), in the midst of regulatory and shareholder concerns.
Write to Jack Denton at [email protected]