Bill Ackman isn’t going to announce a merger partner for his SPAC by the end of March, and many of his fans are unhappy about it.
Last November, Ackman told his hedge fund's investors that he hoped to announce a deal for Pershing Square Tontine Holdings, his $4 billion special purpose acquisition company, during the first quarter.
But in a letter released Monday, Ackman said that he wouldn’t be able to announce anything by March 31— two days away.
“While we previously believed that we would be able to announce a potential transaction by the end of this quarter, we will not be in a position to do so,” Ackman said in a letter that was part of the 2020 annual report for Pershing Square Holdings, his publicly traded hedge fund.
Naturally, Ackman’s fans are disappointed.
“The morale is extremely down in the subreddit,” one wrote in a Twitter direct message to Institutional Investor, referring to the retail investors in Tontine who post there.
In an era of SPAC mania, retail investors had swarmed into Tontine, with many buying call options that expired worthless on March 19, according to their accounts on Reddit and Twitter. While many have rolled the calls over, the volatility around SPACs this year has added to their losses, another retail investor told II. He estimated those losses could exceed $100 million, based on CBOE call option data.
Tontine shares, which had gone public at $20 per share in July, were trading below $24 Monday afternoon, down less than 2.5 percent for the day. They had jumped as high as $34 on February 16, before the SPAC market began to crater.
Speculation about Ackman’s SPAC has been rampant on Reddit, where the PSTH (Tontine’s stock ticker) subreddit’s 11,600 members have been scouring the hedge fund manager’s Twitter feed and public statements for clues to the deal.
But Ackman quashed their hopes for more hints.
“We do not intend to make any announcements about PSTH’s transaction progress until we enter into a definitive agreement,” he said in Monday’s letter. Ackman, who previously told II that he was watching the Reddit group and “working very hard not to disappoint them,” declined further comment.
While many on Reddit may have had a March 31 deadline in mind, Ackman had already suggested that the deal might not happen as soon as he’d hoped.
“I’ve made some previous public statements, which I would like to always achieve. . . but we’re not entirely in control,” Ackman said, according to a transcript of his hedge fund’s annual investors’ meeting that was recently posted in the Reddit forum. That meeting was held February 18.
Some investors wish he’d never gotten their hopes up. “Extremely disappointing,” longterminvestor37 wrote on Reddit Monday morning. “People gambled on options and it was a risk some took and lost, but for the long-term shareholders, what he did was a slap in the face. It would have been better off if he didn’t provide a time line.”
Of course, Ackman never promised a deal would be struck by the end of the quarter. But Ackman, ever the optimist, did sound bullish on the prospect.
“In terms of timing, what we said at the time of the IPO is we said it would take us, we thought about six months to identify a target that we would be in a position to hopefully announce a deal by sometime in Q1 and then close the transaction in the ordinary course thereafter,” he said on the November investor call. “Nothing that we have experienced to-date suggests that we won’t meet our expected timeframe.”
As is standard for SPACs, Ackman has two years from Tontine’s IPO, dated July 22, 2020, to strike a deal. He structured the SPAC to encourage long-term investors to stick around, and that is still his message.
“Eight months since PSTH’s launch, we remain convinced that an investment in PSTH will generate highly attractive long-term returns, even from PSTH’s current stock price,” he wrote in Monday’s letter.
Some Reddit members echoed Ackman’s own attitude. "If you are a long-term shareholder you shouldn't care,” wrote one Reddit member who claimed to be a businessman funded by private equity.
Others said they’ve learned their lessons about the speculative nature of investing in SPACs before a deal has been announced — but they aren’t ready to quit gambling.
“I’m never investing in pre-DA spacs again,” wrote AwedOwl, quickly adding “Rollllll those April $20c. Baby needs a new pair of shoes.”