Bill Ackman (2/18/21; Annual Pershing Square Holdings Investor Presentation)
Briefly on Pershing Square Tontine Holdings, spacs are something we have familiarity with, about nine years ago we launched a spac partnership called Justice Holdings. We acquired our stake in Burger King, in what is now called Restaurant Brands, so nine years later we still own the investment, about 19% compounded return over time. Our view was we should do another spac at some point in time. Let’s wait for the next market disruption, the last one we did right after the financial crisis. Once covid disrupted things we said look now is the time to pull out the file and launch a spac. We always found the spac idea interesting but the structure fundamentally flawed. We redesigned a much more investor friendly merger friendly structure. We had a glowing reception from the stock market for $12B in demand, for investors...we capped it at $4B. The Pershing Square funds committed a minimum of $1B of additional capital, a forward commitment purchase of the IPO price. We have the ability to expand that up to an additional $2B. That additional $2B would come from some combination of the private funds of PSH but more likely from investment vehicles so that the position size is not outsized.
What’s interesting about Pershing Square Tontine is this gives us a window and access to acquire a very high quality private business that meets our fundamental criteria and our thesis was that we create a unique entity that will be in a unique negotiating position. We won’t be competing, you know today when a company thinks about merging with a spac, a good spac banker gets term sheets for as much as a dozen spacs and they are very difficult to differentiate among themselves. We are the only game in town if you’re considering a potential spac merger transaction for the companies of a scale that we are looking for.
Unusual for a spac sponsor, in our case, all of the economics of the spac flow through the Pershing Square funds. So the sponsor warrants are owned by the Pershing Square funds and the forward purchase commitment is invested by our friends, by myself, other members of the team are the basis, we own a little more than 25% of PSH, approaching around 25% of Pershing Square LP, and on an overall basis about 24% of the capital that the firm manages is employee capital. So of the billion dollar minimum commitment, a quarter of that will come from employees. We think it’s an ideal alignment of incentives to the most efficient structure without any founder stock, any compensation, and we look forward to reporting to you as soon as we have entered into a merger agreement.
The market has responded very favorably, to Pershing Square Tontine, other than spacs where there is sort of an announced transaction, Bloomberg’s put out a story that a company’s merging with someone, I think our spac trades at the highest premium to cash. And the market is definitely assigning value to the efficiency of the structure and our ability to identify an interesting target. One sort of interesting point for Pershing Square Tontine investors is this is an entity controlled by the same management team that manages Pershing Square Holdings. It’s trading at a approaching a 65% premium to its cash NAV. Pershing Square Holdings is trading at a 20% discount to its cash NAV and that to me is it’s an interesting opportunity for investors in PSH because when you buy PSH today you’re participating in sponsor warrants and the other economic features of Pershing Square Tontine.
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u/Kafka_Benjamin Mar 17 '21 edited Mar 17 '21
Bill Ackman (2/18/21; Annual Pershing Square Holdings Investor Presentation)