Bill Ackman To Repay Investors $4-B After His SPAC Sinks
After failing to locate a suitable target firm to take public, billionaire activist investor Bill Ackman will close his special purpose acquisition company (SPAC) and refund $4 billion to investors, according to Nicole Goodkind for CNN Business.
Photo Insert: This was a return of investment indeed, just not the kind Bill Ackman had hoped for.
Ackman stated in a statement to shareholders on Monday that he will return the cash and close his SPAC, Pershing Square Tontine Holdings, since he was "unable to consummate a transaction that both meets our investment criteria and is executable."
SPACs, or blank-check businesses, are publicly traded shell entities formed to purchase or merge with a private company and take it public without the disclosures and regulatory obligations of a regular IPO. SPACs normally have two years to find a firm to acquire before the owners are required to repay investors' monies.
The defeat is a big setback for Ackman, a well-known hedge fund manager who established his SPAC — the largest ever in terms of money raised — in 2020 but was unable to close a suitable deal in time.
Originally, Ackman planned to invest in Universal Music through a spin-off by French media behemoth Vivendi. However, the US Securities and Exchange Commission (SEC) objected to the deal because the SPAC held shares in the company rather than merging with it, so the idea was abandoned.
A month later, the SPAC was faced with a lawsuit that called its essential structure into question. According to Ackman, the legal attention made it difficult to locate a new contract.
But, while Ackman has one foot out the door, the other is firmly planted in the SPAC building. He is currently working on a new blank-check product known as a SPARC, or special-purpose acquisition rights corporation. Investors do not put money into a SPARC up front. Instead, they are given the option to purchase shares after a merger target is announced. There is no time constraint for locating a potential takeover target.
"We are disappointed that we did not achieve our initial objective of consummating a high-quality transaction," Ackman wrote in his letter. "We look forward to the opportunity to continue to work on your behalf once SPARC is successfully launched."