Bill Ackman’s Pershing Square Capital Management has surprisingly pulled the plug on the initial public offering (IPO) of its new US-based closed-end investment management fund.
In a statement on Tuesday (July 31), Ackman explained that while there was “enormous investor interest“ for Pershing Square USA, Ackman and his team questioned whether investors would be “better served waiting to invest in the aftermarket than in the IPO.”
“This question has inspired us to reevaluate PSUS’s structure to make the IPO investment decision a straightforward one.”
The withdrawal follows reports of regulatory scrutiny from the US Securities and Exchange Commission (SEC), which was expected to require additional details about the closed-end fund before approving the IPO price. The New York Times reported on Monday (July 29) that the SEC was reviewing a letter to shareholders that Pershing Square submitted last week.
The letter, described as “unusually candid,” outlined challenges the firm faced, including adjusting expectations for the IPO size from a potential $25 billion to a range of $2.5 billion to $4 billion. Ackman also disclosed strong investor interest, with commitments from firms like hedge fund Baupost Group, mutual fund manager Putnam, and the Teachers Retirement System of Texas.
“One family office that has known the firm for 15 years has expressed interest in buying 9.9% of the ultimate deal size, which they said would be ‘small’ even at $1 billion for them,” Ackman said in the letter dated July 25.
Ackman added at the time that the “$25 billion number in the media initially anchored investors in thinking the deal would be too large. Ultimately, I expect this ‘anchoring’ to be helpful to the final outcome.”
“We will report back once we are ready to launch a revised transaction.”
Bill Ackman, Pershing Square Capital Management
Subsequently on Tuesday (July 30), Pershing Square USA confirmed that it has filed an updated prospectus with the SEC, scaling back its targeted IPO proceeds significantly to just $2 billion from the initial $25 billion target.
The fund had planned to offer 40 million shares priced at $50 apiece.
However, Ackman has ultimately decided to withdraw the IPO plan, saying: “We will report back once we are ready to launch a revised transaction.”
Europe-based fund Pershing Square Holdings is one of Universal Music Group (UMG)’s largest shareholders. The fund currently owns 10.25% of UMG, making it the third largest shareholder behind Tencent-led consortium Concerto Partners, which hold a roughly 20% stake, and former Vivendi president Vincent Bolloré with an 18% stake.
Pershing Square Holdings noted in its most recent annual report that UMG is a crucial part of its portfolio, accounting for 24.9% of its net assets.
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