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Pershing Square SPAC’s Unrequited Love Will Be Rewarded

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Chris Markoch
·4 min read
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Pershing Square Tontine Holdings (NYSE:PSTH) is considered one of the hottest special purpose acquisition companies (SPACs) for 2021. The company that is sponsoring the SPAC is run by the hedge fund manager Bill Ackman. What makes this SPAC particularly interesting for some investors is that shares of PSTH stock started at a premium $20 share price.

A man holding two puzzle pieces surrounded by more, smaller puzzle pieces. SPAC IPOs
A man holding two puzzle pieces surrounded by more, smaller puzzle pieces. SPAC IPOs

Source: Pasuwan/ShutterStock.com

The stock is already up more than 25%. Given that the SPAC is linked to Ackman (more on that below), the spike in the SPAC’s share price is not surprising. And this comes even though Pershing Square Tontine Holdings does not yet have a target for its affection (and billions of dollars).

A SPAC is not necessarily more risky than other investment types. But the structure of the SPAC means investors will hold their shares at least until the target of the SPAC is identified. In the case of Pershing Square, Ackman has about 18 months left to find his “mature unicorn.”

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What’s In a Name?

Make no mistake about what a SPAC is all about. As David Moadel accurately states, it’s a bet on the jockey, not the horse. And Bill Ackman is a jockey that stands head and shoulders above others.

Ackman is a well-known activist investor. I remember that his hedge fund’s short sell play in Herbalife Nutrition (NYSE:HLF) didn’t end well. But Ackman’s also had many successes.

10 of 2020’s Most Fascinating SPAC Stocks

And if you’re unfamiliar with Ackman then you should know that his hedge fund, Pershing Square Capital Management, reported its second-consecutive year of record performance in 2020. The fund had an overall return of 70.2%. That beat an already impressive 58% return the fund delivered in 2019.

So it’s only natural that there would be intense speculation regarding who the object of Ackman’s eye will be. But it seems that whoever it will be will not be his first choice?

Fear of Commitment?

I don’t know the rules of this mating dance very well. But I am somewhat amused by the fact that it seems that every time Ackman is linked to a target, the target in question issues a quick denial of the rumor.

Will Ashworth wrote that both the payment platform Stripe and Airbnb (NASDAQ:ABNB) rebuffed Ackman. And Moadel also mentioned that Bloomberg was also on the list of companies that have said no.

Maybe it’s just considered bad form to look too eager to enter into a relationship like this. It could very well be that these companies, like Airbnb, want to control their own destiny. However, my daughter enjoys The Bachelor and tells me that the “contestants” that are offered a rose generally accept.

Nevertheless, Ackman’s affections should not go unrequited for too much longer. And when a suitable partner is found, PSTH stock will probably rise even further. The question is whether investors should jump on the stock right now.

What to Do With PSTH Stock?

I don’t have to remind you that investing in a SPAC is a speculative investment even when investors know the apple of the SPAC’s eye. However, for a blind SPAC the risk is even greater. However investors shouldn’t be too worried. As David Moadel says, investors in PSTH stock are betting on Ackman. And a writer for Seeking Alpha reminds investors that Ackman will find a partner. The question of if whether the marriage will be successful is one for another day.

In that same Seeking Alpha article, the writer suggests that investors can make an investment in Pershing Square Holdings (OTCPK:PSHZF). This is a closed-end fund that allows investors to take a position in Ackman’s hedge fund and, by extension, Pershing Square Tontine Holdings. While this is not a pure play in the SPAC, it would protect investors from paying the current premium on PSTH stock.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.

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