Bill Ackman hopes the record-breaking debut of his “blank check” company will set a precedent and “create a positive flywheel” for the underrepresented on Wall Street.
Last week, the billionaire hedge fund manager tapped a cohort of minority, women and veteran-owned firms (also known as MWVBEs), for his initial public offering.
In doing so, Ackman aimed to make those demographics “a more important part of Wall Street.” Corporate America has been redoubling its efforts to people of color in the wake of widespread protests against racism and police brutality.
Ackman told Yahoo Finance in an interview on the public debut of Pershing Square’s Tontine Holdings (PSTH.U) — a special purpose acquisition company (SPAC) that raised $4 billion from investors — that the company “started a trend here that creates a precedent that I think others should follow.”
It was the 54-year-old activist investor’s first IPO in the U.S., and he made a point to include MWVBE firms in a meaningful way.
“We thought, you know what, this was a perfect time in history to do what’s right from a business perspective,” Ackman said.
While Citigroup, Jefferies, and UBS served as joint-book running managers, Ackman opened the doors to minority-owned CastleOak Securities, Loop Capital Markets, Ramirez & Co., and Siebert Williams Shank as co-lead managers. He also selected veteran-owned Academy Securities and Roberts and Ryan, along with women-owned C.L. King & Associates, as co-managers.
“We said, ‘Look, we’re excited about getting you involved. We’re getting you involved early. This is not philanthropy,” he said.
“We’re going to give you 20% of the economics, which is between 10 and 20 times what banks are typically paid, but you’re going to do the work, you’re going to be part of the team, you’re going to add a ton of value, and you’re going to lead to a great outcome,’” he added.
Without the participation of those firms, the Pershing Square Tontine Holdings deal “would not [have been] nearly as successful,” Ackman added.
Because of those banks, Ackman’s team met a diverse base of investors. One of the most significant orders for the deal came through one of the MWVBE firms — which included a billionaire family that’s “one of the most famous names in the country,” he said, declining to mention which.
“There was very little overlap, interestingly, between the introductions that were made by the big banks versus the smaller firms, and so it was a win-win for everyone,” Ackman told Yahoo Finance.
He added that “it’s not uncommon for a big IPO to include a group of so-called inclusion firms in the IPO, but they’re typically brought in at the 11th hour, a couple of days before the deal is going to get done,” he said.
“They’re given 1%, 2%, 3% of the economics and they don’t get to do anything,” the investor noted.
“And they don’t get stock to allocate. I said, ‘This is silly. It’s not a win for the deal, and it’s not a win for the banks,’” Ackman said.
Julia La Roche is a Correspondent for Yahoo Finance. Follow her on Twitter.