That's all I could take. I tried. I attempted to watch Bill Ackman's infamous interview on CNBC in March 2020, while doing background research on Ackman's Pershing Square Tontine Holdings (PSTH) , a special purpose acquisition company. I just couldn't do it. When he starts to sniffle, it is just too much. I couldn't last another minute. When Ackman stopped sniffling and said "hug your kids" or something like that, I reached my limit.
So, this is exactly the type of guy I would give my money to in return for access to a vehicle that has no assets and whose largest line item on its income statement is legal fees?
The financials for a SPAC never look good, until its target acquisition is completed. I have never seen numbers as ugly as PSTH's, though. Ackman clearly thought he had a deal with an agreement with Vivendi to buy 10% of Universal Music. That deal fell apart in July, as the Securities and Exchange Commission wisely moved in to block consummation of the UMG deal.
According to Reuters, Pershing Square has until July 21, 2022 to announce a deal, which would then start a six-month clock to complete the transaction. PSTH dropped below its IPO price of $20 per share in today's trading, but a glance at PSTH's stock chart tells the full story. PSTH shares rose more than 70% in 2020.
At a current price of $19.96, PSTH has a market valuation of exactly $4 billion. For what? Because the guy who fought valiantly against Herbalife -- and reportedly lost $1 billion in the process -- is running it. Sorry, no. Carl Icahn was on the other side of that Herbalife trade, and I would guess Carl is enjoying PSTH's current implosion.
PSTH shares have fallen 26% year-to date-and they will continue to be pummeled, I believe. I never kick a man when he is down, but this excellent article from Institutional Investor is worth a read. I take no joy from the losses incurred by the 17 investors contacted by II's journalists, but in the world of SPACs, the phrase caveat emptor always applies.
Tontine is a last-man standing arrangement. That has been a favorite of directors in movies such as 2001's "Tomcats" (arguably Jake Busey's best work), but this is no movie. The II article features regular folks who lost significant percentages of their net worth.
The best outcome here that I can see is a de-SPACing and return of funds to PSTH's investors. I see a very low possibility of that outcome. My prediction? What if Ackman arranges a sweetheart deal with some cash-hungry company and spends some of PSTH's $4 billion cash just in time to maintain PSTH's status as a SPAC?
Whatever happens with Pershing Square Tontine Holdings, I believe that Ackman will end up as the last man standing, as individual investors tally up their losses.
Funny how that works....