Billionaire investor Bill Ackman is sponsoring the largest special purpose acquisition company through his Pershing Square Holdings fund.
The New SPAC: A SPAC is a blank check company with no operations that is created to raise capital through an initial public offering with the sole purpose of acquiring an existing company.
Ackman is entering the SPAC sphere by offering 200 million units of Pershing Square Tontine Holdings at $20 per share. Pershing Square will acquire between $1 billion and $3 billion for a total amount of capital of up to $7 billion, CNBC reported.
Ackman will likely target four kinds of companies, according to CNBC contributor Kenneth Squire:
A high-quality, large-capitalization company that could be better off foregoing an IPO process, like Rocket Mortgage.
A venture-backed business with a notable scale that doesn't have as many private funding options.
A large but distressed private equity portfolio company that needs an equity infusion.
Large, high-quality companies impacted by the COVID-19 pandemic.
Details On Ackman's SPAC: A unique feature of Ackman's new SPAC is that Pershing won't be taking any founders' shares. In fact, Pershing won't collect any compensation for itself until shareholders receive a 20% return.
Ackman is also committed to allocating at least 20% of all underwriting fees to minority-owned firms.
Investment bank and financial services company Siebert Williams Shank has participated in many large-scale IPOs, but has been mostly limited to "tiny percentages," CEO Suzanne Shank said on CNBC's "Squawk Box."
Ackman deserves credit for "blowing up" prior Wall Street norms by hiring diverse firms in new significant and meaningful roles, she said.
Ackman On US Economy: The U.S. economy is unlikely to show meaningful improvements until the second half of 2021, Ackman said on a CNBC interview. The timeline for recovery can be accelerated if a vaccine is deemed safe for widespread use or if more people start to wear masks in public spaces, he said.
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