Billionaire investor Bill Ackman said he was throwing the towel at his gigantic blank check company, just days after a lawsuit was filed against shareholders claiming it was created illegally.
In a letter Thursday to shareholders of his $ 4 billion special-purpose acquisition company, or SPAC, called Pershing Square Tontine Holdings, Ackman told investors he planned to return his money and blamed the lawsuit for having ruined their chances of closing a deal to buy a 10-. participation in Universal Music Group.
“Our ability to complete a transaction within the required timeframe has been affected by demand,” Ackman wrote in the letter. While his company Pershing Square Capital believes the lawsuit is “bottomless,” he added that “it can have a chilling effect on the ability of other SPACs to consummate merger transactions or participate in IPOs.”
The lawyers who filed the lawsuit, former SEC Commissioner Robert Jackson and Yale law professor John Morley, allege that Ackman’s SPAC has been acting illegally as an investment firm in rather than as an operating company, also alleging that Ackman has improperly positioned itself to harvest hundreds of millions of people. dollars in fees.
“We are pleased to see that just two days after filing our lawsuit, the world’s largest SPAC now offers to mail back checks worth more than $ 4 billion to investors,” Jackson and Morely said in a statement .
Ackman, however, said “all is not lost,” noting that Pershing is “working to get approval” from the Securities and Exchange Commission for a completely new type of blank check company: a SPARC or a special-purpose acquisition rights company, which only asks investors for cash if it finds a deal.
Ackman, who only has 11 more months to find a target before he is forced to return money to shareholders, said the vehicle could be approved by the SEC “soon.” If SPARC is approved, Ackman will return to investors the $ 20 per share they spent and give them a purchase guarantee at SPARC when they close a deal.
Some investors turned to a Reddit board in Pershing Square to cast their complaints and posted comments such as “f ***” Bill Ackman “and” Bill Ackman should be charged with securities fraud. “
On Friday morning, Ackman posted on Twitter how a SPARC would preserve optionality for shareholders by letting them enter into the deal when the timing made sense. He added that in some cases it is better to create a new entity than to reform an existing one.
In June, Ackman announced that he would use his SPAC to buy the UMG stake after nearly a year looking for a target. Following the SEC’s backlash, which among other issues questioned whether the deal met the New York Stock Exchange’s listing requirements, it announced it would acquire a stake through its hedge fund rather than an SPAC.
SPACs are exchange companies that raise money in public markets and then use that money to merge with a private company and make it public. Shares of Pershing Square Tontine ended the day down 1.3 percent to $ 19.73.