BOSTON, Aug 17 (Reuters) - Billionaire hedge fund manager
William Ackman said on Tuesday his blank-check acquisition
company is not an investment firm that needs to register with
U.S. regulators, pushing back against a lawsuit that alleges
that his Pershing Square Tontine Holdings has improperly
invested in securities.
"PSTH has never held investment securities that would
require it to be registered under the Act, and does not intend
to do so in the future," Ackman said in a statement, referring
to the Investment Company Act of 1940 and the Investment
Advisers Act of 1940, longstanding market regulatory laws.
"We believe this litigation is totally without merit,"
Ackman, who runs hedge fund firm Pershing Square Capital
The lawsuit contends that Ackman's special purpose
acquisition company (SPAC) - the largest ever formed - has acted
like an investment company rather than a SPAC that is exempt
from the registration requirement.
"The SPAC is a natural extension of Pershing Squares
investment fund management business. Pershing Square operates
the SPAC like an investment fund and causes it to invest in
securities like an investment fund. Todays lawsuit argues that
it should be regulated like an investment fund as well," said
John Morley, a professor at Yale Law School who is one of a
handful of lawyers working on the case.
The lawsuit, filed on Tuesday in U.S. federal court in New
York by George Assad, an investor in the SPAC, states:
"Investing in securities is basically the only thing that PSTH
has ever done."
SPACs are meant to merge with private companies and then
take them public.
The Securities and Exchange Commission is taking a closer
look at potential abuses within blank-check companies as these
vehicles have become extremely popular. SPACs launched by Wall
Street financiers as well as celebrities have raised more than
Ackman's SPAC initially announced a plan that his SPAC would
buy 10% of Universal Music Group at a time when it already was
being taken public by Vivendi. Ackman scrapped the plan in July,
saying that his hedge funds would now be making the investment
amid growing concerns among regulators that the deal would not
meet New York Stock Exchange rules.
He initially planned for his SPAC to distribute the
Universal Music Group shares to its investors after its listing
in Amsterdam next month.
The lawsuit will position Ackman against Robert Jackson, a
law professor and former SEC Commissioner who will be arguing
the case along with Morley. The two have long focused their
scholarly research on investor protection and are working on the
case together with law firm Bernstein Litowitz Berger &
Grossman, among others.
The lawsuit also takes issue with fees which should be clear
to outsiders. "The Defendants have received securities that
under any plausible estimate are worth hundreds of millions of
dollars an unreasonable payment for the work performed," the
Ackman said that his SPAC like all others has owned U.S.
Treasuries and money market funds.
(Reporting by Svea Herbst-Bayliss and Anirban Sen; Editing by
Will Dunham and Sonya Hepinstall)