Bill Ackman to close largest SPAC ever, return billions to investors
The hedge fund manager's SPAC was the largest ever formed
Two years after forming the largest special purpose acquisition company (SPAC) ever, billionaire hedge fund manager Bill Ackman is shutting it down.
Ackman's Pershing Square Tontine Holdings raised $4 billion in its initial public offering in July 2020, but the activist investor told shareholders this week he would be returning those funds after failing to find a suitable target company to merge with.
"We launched PSTH in the depths of the pandemic because we believed that the capital markets would likely be impaired from the economic uncertainty created by the pandemic," Ackman wrote in a letter to shareholders Monday.
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"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," he added.
SPACs are essentially blank-check entities that register with an exchange and then "reverse-merge" with a private company to make it go public, but typically have two years to seal a deal.
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PSTH attempted to take a 10% stake in Universal Music Group from parent company Vivendi a year ago to do just that, but the transaction fell apart due to regulatory hurdles.
SPACs surged in popularity in 2020 and 2021 but have sharply fallen out of favor.
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Ackman acknowledged as much in his letter, telling shareholders that PSTH's failure to land a deal in the past year was "largely due to the adverse market for SPAC merger transactions" driven by "the extremely poor performance of SPACs" over the past two years, high redemption rates, and increased risks from litigation and regulation.
FOX Business' Charles Creitz and Reuters contributed to this report.