Pershing Square Tontine Holdings, Ltd. S-1 Analysis
Renowned activist investor, Bill Ackman, is gearing up to spearhead the largest SPAC IPO to date. Here are the key points from the SPAC’s S-1 statement filed earlier this week:
IPO Terms:
Company: Pershing Square Tontine Holdings, LTD
CEO: William Ackman
Proposed Symbol (units): PSTHU
Exchange: NYSE
*Unit Price: $20
Units Offered: 150 mm
Offer Amount: $3 bn
State of Inc: DE
* A single unit consists of one Class A common share, one-ninth of one redeemable warrant, and a contingent right to receive one Tontine “distributable” warrant.
Prospectus:
“We are a newly organized, blank check company incorporated in Delaware and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination.”
Underwriter Info:
Lead Underwriter(s): Citigroup, Jeffries, UBS Investment Bank
Shares Over Allotted: 22.5 mm
S-1 Notes:
- Pershing Square Capital Management is serving as the main sponsor
- Ackman established Pershing Square in 2003
- Hedge fund managed $10.7 bn in assets last year
- Back in 2012, Pershing Square Capital Holdings co-sponsored Justice Holdings which raised $1.5 bn in its IPO and later merged with Burger King
- The aforementioned deal has yielded a compounded annual total return of 20% since its merger
- Units will begin trading immediately following the IPO at a unit price of $20
- Shares and warrants will begin trading under the ticker symbols PSTH and PSTH.WS, respectively, exactly 52 days from the prospectus being issued (Aug 15)
- Each unit consists of one common A class stock and one-ninth of a warrant
- Investors who choose not to redeem units will be issued an additional two-thirds of a warrant for each unit held
- Sponsor/Director Warrants constitute 5.95% of common shares post-merger/acquisition
- Sponsor is entitled to Forward Purchase Agreement ($1-3 bn worth of units at a strike price of $20 if additional funds are required to close deal)
- Post business combination, sponsors can purchase additional shares at market value only if shares are trading at least 20% higher than its IPO price
Personal Thoughts
Ackman’s SPAC is very unusual in the way that it’s structured. Notice how incentivizing the SPAC’s issuance structure is in terms of redeemable warrants. I find this decision extremely interesting as most SPACs are not designed to be this attractive to investors. After thoroughly reviewing its S-1 statement, I feel that Pershing Square Holdings will either be a home run or a complete strike-out which is not that far of a stretch considering Ackman’s past of huge wins and devastating losses.