Bill Ackman’s SPAC Deal Is Off. What Comes Next.

But to nary avail. Pershing Square Tontine’s projected deal, announced conscionable past month, wasn’t a traditional SPAC deal. In fact, it wasn’t adjacent a merger, and would person created 3 nationalist vehicles, with 2 hoping for much deals successful the future. SPAC shareholders would person received a 10% involvement successful Universal Music Group, rights to a caller conveyance Ackman coined a peculiar intent acquisition rights company, oregon SPARC, and the remaining chunk of Pershing Square Tontine. Normally, SPACs instrumentality a stake successful a backstage operating company, which gets entree to its currency and goes nationalist successful the process.

Instead, Ackman’s Pershing Square Capital Management hedge money volition beryllium buying that UMG involvement from its bulk owner, the French media conglomerate Vivendi (VIVHY). And Pershing Square Tontine volition person different 18 months to prosecute a much accepted SPAC merger.

With a warfare thorax of $4 cardinal successful its trust, that could inactive mean an breathtaking woody for the SPAC down the road. No connection connected the aboriginal of the SPARC.

“In airy of our caller experience, our adjacent concern operation volition beryllium structured arsenic a accepted SPAC merger,” Ackman wrote successful his missive Monday. “While we are disappointed with this outcome, we proceed to judge that the unsocial standard and favorable operation of PSTH volition alteration america to find a transaction that meets our standards for concern quality, durable growth, and a just price.”

Pershing Square Tontine is besides canceling its stock and warrant redemption offers. UMG volition proceed to spell nationalist connected Amsterdam’s Euronext banal speech successful the coming months.

Bagging different unicorn volition stay a situation for Ackman and his team. Pershing Square Tontine was the largest SPAC ever raised—in July 2020—with $4 cardinal successful archetypal nationalist offering proceeds and a committedness to acquisition arsenic overmuch arsenic an further $3 cardinal successful shares by the Pershing Square hedge money astatine the clip of a merger. That $7 cardinal successful imaginable ammunition for a woody means a really, truly large and invaluable institution needs to beryllium the target. And that is conscionable a overmuch smaller beingness of targets than a SPAC with a spot lone a fraction of that size.

Airbnb (ABNB) had been a rumored target, earlier it went nationalist successful a accepted archetypal nationalist offering successful December. Other names speculated connected Wall Street and Reddit alike—without evidence—have included payments processor Stripe, fiscal information elephantine Bloomberg LP, Elon Musk’s rocket institution SpaceX, fast-food concatenation Chick-fil-A, and sports car shaper Porsche.

Pershing Square Tontine banal dropped immoderate 15% instantly aft its now-canceled transaction announcement connected June 4, and continued to drift little aft that. Barron’s wrote astatine the time that the projected woody had a batch of moving parts, but a sum-of-the-parts investigation yielded worth for investors not acrophobic of that complexity. 

“While we judge our shareholders admit UMG’s bonzer attributes including its charismatic maturation characteristics, concern quality, and superb absorption team, we underestimated the absorption that immoderate of our shareholders would person to the transaction’s complexity and structure,” Ackman wrote. “We besides underestimated the transaction’s imaginable interaction connected investors who are incapable to clasp overseas securities, who borderline their shares, oregon who ain telephone options connected our stock.”

Shares closed connected Friday astatine $20.63, a flimsy premium to the $20-per-share currency worth of the SPAC’s trust.

Write to nicholas.jasinski@barrons.com