Bill Ackman’s SPAC Deal Remains Elusive

A deal for Bill Ackman’s special-purpose acquisition company, Pershing Square Tontine Holdings, doesn’t appear to be imminent — and investors are gloomy. 

The announcement of an acquisition with a target Ackman has been chasing since November could still be “weeks” away, he told investors in his publicly traded hedge fund Pershing Square Holdings on Tuesday.

Or else it might not ever happen.

“There’s no change here in that we started working on a transaction in early November, have done our homework, we like the business and love the management team,” he said on a quarterly call with investors in the hedge fund.

Ackman added that Pershing Square was “working to complete a transaction within weeks.”

He later said that he would have an announcement “hopefully within a couple of weeks or so. Or we if we can’t get it done, we will move on to target number two.”  

In its 10Q filing with the Securities and Exchange Commission filed Monday, Tontine gave a bit more information. The blank check company said that “substantial progress has been made” in negotiations with the target, but “significant issues remain to be addressed before a transaction can be announced and consummated, if at all.” The filing also disclosed that Tontine had spent almost $4.8 million in legal fees so far. 

Ackman, who declined to comment beyond what was said on the call, may be managing expectations of the investors in Tontine, given the blowback he has received for not completing a deal in the first quarter, as he had previously said he hoped to do.

Or, as one retail investor in the SPAC conjectured, he could be trying to put pressure on the target to reach an agreement.

“He mentioned the deadline in this public call to back up the deadline that has probably been communicated with the potential target,” the investor, whose anonymous twitter handle is @PhoenixtownM, suggested in a private Twitter message to Institutional Investor.

Hidden meanings or no, investors contacted by II considered the comments bearish, and the stock’s reaction indicated the same. It fell sharply as Ackman spoke shortly before noon, and was down more than 2 percent by 12:30 p.m. When markets closed, Tontine was down 1.4 percent for the day.

“The fact that he keeps bringing up ‘backup target’ seems like the deal won’t happen,” bemoaned one of the retail investors who is part of a self-described “PSTH support group,” named for the stock symbol of the blank-check company.

The “sentiment is very low” in that group, comprised of about 45 people, said this investor, who is such a fan of Ackman that his anonymous twitter handle is @BillyACKm. He said the group’s investors have about $20 to $25 million invested in Ackman’s SPAC. That amount is greater than what is held by many institutional investors.

Tontine still is outperforming other SPACs that have not yet signed a deal with a merger partner. But its shares have fallen 11 percent this year, and some institutional investors either sold out or trimmed their stakes during the first quarter.

Soroban Capital, one of the few hedge funds that got into the Tontine IPO at $20 per unit, sold its entire 5 million-share stake during the first quarter, according to its quarterly 13F filing with the SEC.  

Another big hedge fund, Taconic Capital, sold half of its roughly 1.1 million shares. At the end of the first quarter, its stake was worth around $14 million. 

The Ontario Teachers Pension Plan also sold a big chunk: 4.3 million shares. But that accounted for only 38 percent of its stake, and it remained the fifth-biggest shareholder at the quarter’s end, with almost 7 million shares worth about $176 million.

Perhaps more important, the top two early backers of Tontine stayed pat. The biggest stake at the end of the quarter was held by Guggenheim Capital, which owned 22 million shares worth $554 million as of March 31, followed by Baupost Group, which owned 12.7 million shares worth $320 million.