Bill Ackman seeks to revive IPO with sweeteners for investors

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Bill Ackman is seeking to resurrect the initial public offering of Pershing Square USA by offering sweeteners to early investors, as the billionaire tries to address one of the key stumbling blocks to the float.

The hedge fund manager has sounded out backers about a structure that would include additional incentives alongside Pershing Square USA stock, after Ackman last month withdrew the IPO of his new US investment fund following weak demand.

He originally set a $25bn target for the New York Stock Exchange listing of the closed-end fund, which would have made it one of the largest-ever IPOs. Ackman withdrew the listing after cutting the fundraising target by more than 90 per cent to just $2bn.

Ackman has discussed several options for the new structure, one of which would gift early investors in Pershing Square USA the right to buy extra shares in the vehicle in the future at a fixed price through warrants, two people familiar with the matter said.

However the real prize for investors in Pershing Square USA is likely to be rights to buy into the eventual IPO of his hedge fund, Pershing Square Capital Management, which manages investments for both the proposed US vehicle and his existing European fund.

A structure that combines shares in Pershing Square USA with another security would resemble that of a special purpose acquisition company, or Spac. Warrants and Pershing Square USA shares would trade as a unit for a period after the IPO before separating to trade as separate instruments.

Under the previous plans for the IPO, Ackman had sought to lure investors by waiving management fees for the fund’s first year of trading.

However during the marketing process, Ackman met resistance from investors who sought further incentives to invest in the IPO rather than waiting to buy shares after the launch, when such funds often trade at a discount. If warrants were issued alongside the Pershing Square USA stock, the structure might no longer include such a waiver, one of the people said.

Two of the people familiar with the matter said discussions were fluid and were still subject to change.

Separately, two people close to the hedge fund said they expected Ackman to bring the Pershing Square IPO back to the market before the end of this year to keep up perceived momentum.

The investor, who has become a big presence on Elon Musk’s social media platform X and racked up more than a million followers, was hoping to rely on his newfound “notoriety” to drum up interest for Pershing Square USA stock.

Ackman sold a 10 per cent stake in his hedge fund, Pershing Square Capital Management, to a group of investors including San Francisco-based Iconiq Capital and Israeli insurance company Menora Mivtachim at a valuation of $10.5bn in June. The Financial Times previously reported that Ackman planned to list his hedge fund as early as 2025.

Ackman is known for coming up with novel structures that have at times caused friction with regulators.

In June 2021, Ackman bought a 10 per cent stake in Universal Music Group using money raised through his Spac, Pershing Square Tontine Holdings, in a first deal of its kind.

It was ultimately shot down by regulators, which prompted him to come up with a new type of blank-cheque company called a special purpose acquisition rights company or Sparc where investors had the right but not the obligation to put money into a future deal.

Pershing Square declined to comment.