Ackman’s non-SPAC sparks a shrug from investors


LONDON (Reuters Breakingviews) – Bill Ackman’s online sidekicks aren’t fazed by the lower premium attached to billionaire Pershing Square’s vehicle Tontine Holdings. The self-proclaimed Tontards trade memes on Reddit glorifying the investor they call “daddy,” while a sock puppet offers a jubilant sum-of-parts assessment. Still, PSTH’s actions suggest Ackman’s unconventional special-purpose acquisition company has lost its luster.

Investor Bill Ackman speaks in Laguna Beach, California, United States, October 17, 2017. REUTERS / Mike Blake

The boss of the speculative fund detailed the state of play during a call to investors on Wednesday. Ackman’s SPAC has agreed to buy 10% of Universal Music from Vivendi. The owners of PSTH will get about $ 14 for each of their shares, based on the acquisition valuation of $ 40 billion. PSPC will have $ 1.6 billion in cash, equivalent to about $ 5.70 per share, and will remain listed while it finds a second target. Finally, for each PSTH share, Ackman offers a negotiable right to invest $ 20 in another vehicle called a Special Purpose Acquisition Rights Company, or SPARC.

A SPARC, like a SPAC, is designed to find a merge target. The novelty is that investors only get by after identifying a deal, so they don’t need to block funds in advance. Digital enthusiasts love it. Puppet Bill Sockman expects SPARC to give worshipers perpetual access to private companies at discounted valuations.

PSTH has promised it too. The vehicle traded at an average premium of 27% over its cash, which is unusual for a SPAC, between its September float and when Ackman unveiled the deal with Vivendi. Deduct the universal distribution and remaining cash from its price of $ 23 and it’s about $ 3 per share left. This implies a reduced premium of 12% over the NAV for both a PSTH tracking agreement and a future SPARC transaction. Replace Universal with a higher value, which JPMorgan says could be worth close to $ 60 billion, and the PSTH share price involves no Ackman magic.

One explanation, put forward by Sockman, is that shareholders don’t like what they get. Alternatively, the market may simply rate Ackman’s trades as simply average. The dashed hopes of a result more dramatic than a tranche of Universal Music may explain why PSTH stocks have underperformed the IPOX SPAC index by 7 percentage points since the deal was announced – and why only Hardcore Ackman fans are excited for a sequel.

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NEWS CONTEXT

–Billionaire investor Bill Ackman said on June 23 that he may consider a public listing for Universal Music in the United States after its listing in Amsterdam in September, if the company’s board of directors agrees.

– Ackman’s Pershing Square Tontine Holdings buys 10% of the music label from French parent company Vivendi for an aggregate value of $ 40 billion. Universal’s catalog includes The Beatles, Taylor Swift, and others.

– Ackman was speaking on a conference call with investors and said he saw no legal or regulatory restrictions that would prevent a double listing, and that this could happen through either a direct listing on the NYSE or the Nasdaq or by sponsored American certificates of deposit.

– For previous author columns, Reuters clients can click [PROUD/]

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