(Adds more comments from Ackman, and background)
NEW YORK, July 11 (Reuters) - Billionaire investor William
Ackman, who had raised $4 billion in the biggest-ever special
purpose acquisition company (SPAC), told investors he would be
returning the sum after failing to find a suitable target
company to take public through a merger.
The development is a major setback for the prominent hedge
fund manager who had initially planned for the SPAC to take a
stake in Universal Music Group last year when these investment
vehicles were all the rage on Wall Street.
In a letter sent to shareholders on Monday, Ackman
highlighted numerous factors, including adverse market
conditions and strong competition from traditional initial
public offerings (IPOs), that thwarted his efforts to find a
suitable company to merge his SPAC with.
"High quality and profitable durable growth companies can
generally postpone their timing to go public until market
conditions are more favorable, which limited the universe of
high-quality possible deals for PSTH, particularly during the
last 12 months," said Ackman, referring to the ticker symbol for
In July 2020, Pershing Square Tontine raised $4 billion in
its initial public offering and wooed prominent investors
ranging from hedge fund Baupost Group, Canadian pension fund
Ontario Teachers and mutual fund company T. Rowe Price Group.
SPACs, also known as blank-check companies, are
publicly-listed shells of cash that are created by large
investors - known as sponsors - for the sole purpose of merging
with a private company. The process, which is similar to a
reverse merger, takes the target company public.
SPACs peaked during 2020 and the early part of 2021, helping
rake in paper gains worth hundreds of millions of dollars for a
number of prominent SPAC creators like Michael Klein and Chamath
However, over the past year, companies that merged with
SPACs have performed poorly, forcing investors to shun
blank-check deals. That coupled with tighter regulatory scrutiny
and a downturn in equity markets have practically shut down the
SPAC economy, with several billions of dollars at stake.
Moreover, the record-breaking performance of regular IPOs in
the United States in 2021 posed competitive challenges for SPAC
sponsors like Ackman, as several richly valued startups chose to
list their shares on exchanges through traditional routes
"The rapid recovery of the capital markets and our economy
were good for America but unfortunate for PSTH, as it made the
conventional IPO market a strong competitor and a preferred
alternative for high-quality businesses seeking to go public,"
In July last year, Ackman's efforts to take a 10% stake in
Universal Music, which was being spun off by French media
conglomerate Vivendi, through his SPAC were derailed due to
regulatory hurdles. The U.S. Securities and Exchange Commission
objected to the deal and Ackman put the investment into his
hedge fund instead.
"While there were transactions that were potentially
actionable for PSTH during the past year, none of them met our
investment criteria," Ackman said.
(Reporting by Svea Herbst-Bayliss; Editing by Sriraj Kalluvila
and Muralikumar Anantharaman)