Billionaire Bill Akman, an investor and director of the New York hedge fund Pershing Square, has announced that he will return $ 4 billion to investors, after failing to find a company that would fit the merger with the SPAC company he founded. In a letter sent to shareholders on Monday, Ackman highlighted many factors, including adverse market conditions and strong competition from traditional issues (IPOs), that thwarted his efforts to find a suitable company to merge his SPAC company with.
SPAC companies are straw companies set up by large investors for the sole purpose of merging with a private company. The process, which is similar to a reverse merger, brings the target company to a public offering. In July 2020, Pershing Square Tontine raised $ 4 billion and recruited prominent investors, ranging from the hedge fund Baupost Group, the Canadian pension fund Ontario Teachers and the mutual fund company T. Rowe Price Group. Now, after prolonged efforts, Ackman has announced that he will dissolve the SPAC company: “Although there have been deals that have had potential for PSTH over the past year, none of them have met our investment criteria,” Ackman said.
Despite a promising start, SPAC companies as a means of investment have fallen from a peak. Over the past year, companies that have merged with SPAC have performed poorly, forcing investors to shake off these deals. Combined with more stringent regulatory oversight and declining stock markets, the SPAC economy has been almost completely shut down.
Addressing investors, Ackman said that “the rapid recovery of our capital and economic markets has been good for America, but unfortunate for PSTH, as it has made the conventional IPO market a strong competitor and a preferred alternative for quality businesses seeking IPOs,” adding that “profitable and high-quality companies “Sustainable growth can generally delay their timing to go public until market conditions become more favorable, which has limited the potential for quality transactions for PSTH, especially during the last 12 months,” Ackman said.