- Billionaire investor Bill Ackman said in an interview with CNBC on Wednesday that Pershing Square’s SPAC, Tontine Holdings, is unique in that Pershing is “taking no compensation.”
- “We set up an alignment that’s very appealing to investors. We created the most investor-friendly SPAC in the world,” Ackman said.
- Ackman argued that taking a company public via a reverse-merger with a SPAC, also known as a blank-check company, is a less arduous task than going the traditional IPO route.
- The Pershing Square Tontine Holdings SPAC begins trading today and is raising up to $4 billion as it hunts for a minority stake in a well-run private company.
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Bill Ackman is trying to change the status quo in SPAC land.
In an interview with CNBC on Wednesday, Ackman said that today’s trading debut of the Pershing Square Tontine Holdings SPAC is unique for a reason other than the amount of money it’s raising, given that it’s the largest initial public offering of a SPAC ever.
“What’s new in our structure is it’s the first SPAC where we’re taking no compensation,” said Ackman.
The SPAC model, which is used to bring a private company public via a reverse-merger, has been criticized as not being shareholder friendly, and is often viewed as a compensation vehicle for the sponsor and its management team at the expense of the investor.
“We set up an alignment that’s very appealing to investors. We created the most investor -riendly SPAC in the world,” Ackman said.
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SPACs have seen a surge in popularity over the past year since high-profile companies used the strategy to go public, including Virgin Galactic, DraftKings, and Nikola Corp.
The advantage to going public via a SPAC is multi-faceted, according to Ackman. First, companies avoid the arduous and expensive task of pitching institutional investors on a countrywide road show. Second, the IPO is much quicker for the private company and less of a blind date in terms of who the investors will be and how much money the company will be able to raise. And third, the IPO process avoids some of the regulatory hurdles imposed by the Securities and Exchange Commission.
“We have an instantaneous IPO with some of the best investors in the world. The difference is they get a lead investor, we’ll have the benefit of insider information, we’ll have the benefit of doing deep due diligence into the company,” said Ackman.
Tontine Holdings’ goal is to acquire a minority interest in a private company. The SPAC will have equity capital of at least $5 billion to put toward an acquisition.
“Our goal is to buy a minority interest in a business, and what I mean by that is we’re going to merge with someone. We’re going to take them public and our shareholders will own 20%, 25%, 30% of the company. We believe we can make an advantageous deal for our shareholders, really bringing a great opportunity for a company to accelerate its growth, deleverage the balance sheet, and provide capital for investors seeking to make an exit,” Ackman explained.
Ackman added that given the uncertainty in the markets due to COVID-19 and the upcoming presidential election, now is the time investors want to be on the offense and have cash to deploy.
Ackman later explained in the interview why he’s bullish on America and on the stock market in the long term.
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