Update (1005ET): The Pershing Square Tontine has started trading, and shares are already going for more than the offering price.
- PERSHING SQUARE TONTINE UNITS OPEN AT $21.10 ON NYSE VS IPO PRICE OF $20/UNIT
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Bill Ackman was already one of the most recognizable figures in the hedge fund industry when he sat for his now-infamous interview back in March where he declared that “hell is coming”, a 15-second clip that was played in a seemingly endless loop as markets embarked on a selloff with little precedent in terms of its sheer speed and brutality. When it was revealed a couple of months later that Ackman had made billions of dollars betting on the rebound, he was widely lampooned as treacherous opportunist, even as he insisted that he had unwound his fund’s hedges and short positions just days before.
Since then, Ackman has managed to raise more than $4 billion via the public markets, leveraging his name recognition to attract mountains of interest for an unusual plan: Ackman’s new publicly traded fund – a “Special Purpose Acquisition Company” – will use the money raised during its offering to buy a large stake in a private company, as we explained last week.
These so-called “SPAC”s…
Today’s CNBC ‘Acronym of the Day’: SPAC
— jsadinolfi (@jsadinolfi) July 22, 2020
…are growing increasingly popular.
Ackman’s “SPAC”, which he has named the “Pershing Square Tontine Holdings”, will raise billions, then combine that money with more funds from Pershing Square (Ackman’s asset-management firm) and other possible investors to invest in a “unicorn” that Ackman finds to be undervalued. The new vehicle is set to begin trading on Wednesday, which marked the occasion for Ackman to appear on CNBC for his first interview on the channel since his March rant.
During Wednesday’s remote video interview, Ackman cut right to the chase, explaining why the “SPAC” wrapper offers such a great advantage. The “cash shell allows someone to instantaneously…be in a position to put their money to work,” Ackman said, emphasizing that speed is so critical in such a fast-moving market. This flexibility will enable the SPAC to “make an advantaged deal for our shareholders,” Ackman said. Shares of the SPAC are being sold at $20 apiece.
The current IPO process, Ackman argued, is too cumbersome for many investors. Companies must file a prospectus, “then 6 weeks later, if they’re luck, file a revised prospectus where investors can see 3 years of financial data and all kinds of commentary,” Ackman said. “If you look at what happened with WeWork…ultimately, this destroyed the company.”
While WeWork’s absurd prospectus definitely wasn’t well-received by the market, we’re not sure that WeWork is the best example here, considering that it has proven to be a disastrous investment for its biggest backer, SoftBank, which is now embroiled in a lawsuit with WeWork after reneging on a piece of its rescue deal.
But Ackman argued that companies heading for an IPO are often placed in the unenviable position of not being allowed to respond to criticism from the press: “You’re under that much of a microscope…and you’re not allowed to comment to the media because according to SEC rules, you can’t.”
Ackman’s discussion of the ‘tontine’ was cut short, however, when Andrew Ross Sorkin and the rest of the Squawk Box crew cheekily replayed the “hell is coming” clip from Ackman’s previous interview with CNBC. Ackman was nonplussed by this, and responded by attacking CNBC for taking his words out of context.
The hedge fund investor claimed that what he really said boiled down to “If we do nothing…THEN hell is coming,” Ackman said, before launching into a tirade slamming CNBC over its ‘sensationalist’ approach. “I really blame CNBC…they took a 15-second clip of my interview and ran with it because it was good television…I said ‘look we’re at a fork in the road…and one path could lead to hell if we don’t shut down the country.'”
What’s more, Ackman said, his bets against US stocks were unwound before the March interview. By the time he spoke, Ackman was building his long position, which eventually netted a massive payout,.
“Some people actually listened to what I said and bought Hilton, and bought Macy’s,” Ackman insisted.
When host Joe Kernan taunted Ackman by noting that the situation in the market “doesn’t look like hell to me”, Ackman deftly replied that the S&P 500’s performance doesn’t reflect the hard times plaguing the US economy.
“The market is a reflection of…the most well-capitalized companies in the world…but think about restaurants, think about gyms, think about bars…if you use the S&P 500 as a gauge of how everyone is doing…you’re leaving out a large segment of the economy.”
“I hate to get up in your face about this,” he added.
But if Ackman didn’t cause it, then why did the market bottom after Ackman’s remarks? Perhaps the timing of the US shutdowns might have a clue.
“Why did the market bottom? Because California shut down one day after my interview. Because New York shut down two days after the interview. The market was down 6.5% before I even went on TV that day.”
Is Ackman still feeling ‘bullish’? Yes, he insisted.
“We are long-term bullish on America; We are long-term bullish on the markets. But I would say I’m cautious on markets over the next period of time. We have today a short position in a high-yield index. We are bearish on highly-levered companies.”
“The highly-levered businesses will struggle because it will take time for the economy to reopen,” Ackman said. “I don’t think the Fed is going to bail out companies with too much debt.”
“We are long-term bullish on America,” Pershing Square’s Bill Ackman says, adding “but I would say I am cautious on markets over the next period of time.” https://t.co/ALk7PV8ee8 pic.twitter.com/6aAN2r5WVs
— CNBC (@CNBC) July 22, 2020
Though he added that things won’t start to meaningfully improve until the second half of next year.
“My expectation is things don’t get meaningfully better until the second half of 2021.” Pershing Square’s Bill Ackman says the U.S. is having a “sloppy reopening” of the country. https://t.co/ALk7PV8ee8 pic.twitter.com/OPUyDrDAaM
— CNBC (@CNBC) July 22, 2020
To be sure, he has purchased some hedges, like betting against high yield bonds. Being short high-yield credit is “a good hedge” Ackman said because “the Fed isn’t going to bail out companies that have too much debt.”
Ackman is short HY?
Time for Icahn (and the Fed) to buy every junk bond in existence
— zerohedge (@zerohedge) July 22, 2020
We wouldn’t be surprised to see Ackman eat those words.