Two years after he founded the largest special purpose company ever, or SPAC, billionaire Bill Ackman has concluded that he will not be able to close a deal that meets his needs.
In a letter to shareholders on Monday, Mr. Ackman said he would return the money from his $4 billion SPAC, Pershing Square Tontine Holdings, because it was “unable to complete a transaction that would satisfy both our investment criteria if feasible.”
SPACs, also known as blank check companies, use capital from the public market to invest in a private company while making it public. They have two years to find a company to take over before their owners have to return their money to investors.
The product was Wall Street’s toy of choice during the pandemic, as young companies wanted to go public quickly and took advantage of high valuations in the public market. But it has fallen out of favor as many of the companies that have gone public have stranded and regulators have turned to the product.
Mr. Ackman cited these reasons to explain why his SPAC hadn’t found a deal yet. Given how rocky public markets are right now, he said, many “high-quality and profitable” companies are delaying IPOs.
mr. At one point, Ackman had found a suitable candidate through a complex transaction that involved buying a minority stake in Universal Music and rolling out two other blank checks. But regulators refused and the plan was scrapped. Later, a lawsuit challenged the fundamental structure of the SPAC. Mr. Ackman warned at the time that the threat of a lawsuit would make finding another deal more difficult.
He suggested replacing his SPAC with a new blank check vehicle called a SPARC. Investors in a SPARC do not invest money upfront. Instead, they get the right (the R in SPARC) to buy in as soon as the vehicle announces a merger target, which has no time limit.
In his letter to shareholders, Mr. Ackman said: “We are disappointed that we have not achieved our initial goal of achieving a high quality transaction”, adding: “We look forward to the opportunity to continue working on your behalf once SPARC is successfully launched .”
