Bill Ackmann’s Universal Music deal heralds the era of Spac 2.0

Bill Ackman has already tried once and failed to redefine it Spac:“Now he ‘s trying again.

The hedge fund management company Pershing Square Tontine Holdings, which raised $ 4 billion last year, is not only the largest empty car ever launched. It eliminated some of the founders’ bonuses, such as free shares, which in some areas gave the Spac phenomenon a bad name.

Few Spacs lagged behind the model as the new release boom continued this year և only suddenly cold over the past few months. With his tricky deal to buy a stake in Universal Music on Friday PSTH split, Ackman is positioned for the next round of the Spac era.

It was the acquisition of the title not someone waitingInstead of Bloomberg or Stripe, the size of private companies to make $ 4 billion Spac public in the US, Akman said he was buying 10 percent. share in music publishing At a cost of $ 40 billion, Universal shares will be distributed to PSTH investors after the company’s listing in Europe later this year. It was more like a hedge fund short-term deal than a traditional Spac deal.

But other parts of the announcement could signal what awaited Spacs as they orient themselves. investor skepticism և: regulating pressure,

Following the distribution of shares in Universal Music, PSTH will continue to be a smaller empty company that will continue to search for targets. It should be a new vehicle that will allow its current investors to finance one future transaction, but without raising cash, as they do Traditional Spac:,

Initially, the three-year plan lowered PSTH shares to their lowest price since September last year, but on Monday they fell slightly as investors digested Ackman’s ability to get out of the difficult situation quite elegantly.

PSTH is hardly the only Spac that struggles to find the full achievement. More than 400 people are wanted after the fundraiser erupted.

Michael Olrogg, an associate professor at New York University, said it was difficult for Akman to find the right deal in part, as private companies’ ratings had skyrocketed in the past year.

“To the extent that Akman could not find a deal that could reasonably place all of Spac’s capital in one company, I think it’s good that he found a creative alternative like himself,” Ohlrog said.

Investors will now have two more opportunities to participate in Ackman-led trades, neither of which will be under the usual Spacs restrictions.

PSTH will remain a cash-based company with access to up to $ 2.9 billion through a financing agreement with the Ackman Hedge Fund, but this time over a two-year period. Pershing Square owns about 29 percent of the company.

The other vehicle is a new organization, which Akman calls the Special Purchase Company, or Sparc, whose owners will have an option but no obligation to participate in the next transaction. Sparc will be listed on the New York Stock Exchange, but unlike Spac, it will not raise money until it finds a target և There is no obligation for PSTH investors to use the option. If they choose to do so, they will pay $ 20 per share.

Colombia Business School professor Shivaram Rajgopal said there were positives to the deal.

“Sparc’s structure goes one step further than Spac է gives better options to capital suppliers. “It’s a little less of a ‘trust me with the money’ we have with Spacs,” he said.

The US Securities and Exchange Commission has put a brake on the Spac phenomenon after making a record number of donations in the first two months of 2021. Sp forced Spacs to make time-consuming changes to their accounting.

Criticism of Spacs has also reached Congress. “It turns out that the Spac mergers are designed to give Wall Street insiders huge profits and retail investors to pay those costs,” said Maxine Waters, a Democrat from California who chairs the House of Representatives, at last month’s hearing. Services Committee.

Investor enthusiasm for Spacs has waned further this year, in part due to poor stock prices announcing or ending their gains.

The two-year period imposed on Spacs is expected to lead to lower quality deals as sponsors who will lose their initial investment if they are unable to make a deal, rushing to attract companies that may not be ready for the public. Sparc can help alleviate the pressure և possibly lead to better deals.

“This structure is much more meaningful,” Rajgopal said. “I think this is Spac 2.0.”

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