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Guggenheim, Baupost Stick With Ackman’s SPAC

More hedge funds piled into Pershing Square Tontine after the stock fell.

The biggest investors in Bill Ackman’s special purpose acquisition company, Pershing Square Tontine Holdings, held on to most of their shares last quarter, even as the stock tumbled after the Securities and Exchange Commission nixed the SPAC’s plans to invest in Universal Music Group and Tontine was hit with an investor lawsuit.

Guggenheim, Tontine’s top investor with 22 million shares, is one that stood pat. It owns 11 percent of the SPAC, making Tontine its third-largest publicly traded equity position, according to its latest 13F filings with the SEC. 

Guggenheim got in on Tontine's IPO last summer at $20 per share plus warrants, and the stock is now trading now slightly below that level. If Guggenheim doesn’t like the deal that Ackman strikes for the SPAC, or if Ackman decides to liquidate the vehicle, Guggenheim will get out at its cost of $20 per share. Unless it has sold the warrants, it will also hold onto those. 

Like other shareholders, Guggenheim would also be eligible for warrants on Ackman’s new vehicle, which he has called a SPARC (for special purpose acquisition rights corporation) should the SEC approve it. 

Another big player sticking with Ackman is Seth Klarman’s Baupost Group, also one of Tontine’s first investors. Klarman sold 5 percent of its shares, but it remains the third biggest investor in Tontine, with a 4.8 percent stake, valued at $188 million. At the end of September, it owned 9,550,504 shares, having shed 540,151 shares during the quarter.

During the SPAC surge in January and early February, Baupost bought more shares. It reported in mid-February that it owned 12,707,924 shares, or 6.35 percent of Tontine, so it has since sold more than 3 million shares, or a quarter of its stake. 

Another big holder, the Ontario Teachers’ Pension Plan Board, also boosted its holdings in February to 11,325,000 shares for a 5.66 percent stake. But Ontario Teachers has been selling down since then, including about 26 percent of its shares during the most recent quarter. It now owns 5,168,738 shares, which means it is still the fifth-biggest owner.

While these investors have been paring their holdings, the stock’s decline to slightly below $20 has given an arbitrage opportunity for those who buy below that price. They will be able to get at least $20 per share for their investment.

Among the newcomers taking advantage of that opportunity are Aristea Capital, which took the largest new position with $70 million worth of Tontine shares. Marshall Wace was second with a $48 million stake, while D.E. Shaw and Hudson Bay Capital Management also were new buyers during the quarter, accumulating positions worth $33 million and $32 million, respectively.

Meanwhile, Citadel Advisors increased its position by 145 percent, while Anson Funds Management boosted its stake by 1,102 percent. Citadel owns $41 million worth of shares, while Anson’s stake is worth $36 million.

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