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Bill Ackman has withdrawn the proposed public listing for closed-end fund Pershing Square USA in a huge about-face for the billionaire investor who just months ago predicted it would be among the largest initial public offerings ever.
The proposed IPO’s spectacular collapse caps a dramatic stretch for the billionaire hedge fund manager, who has embraced social media fame in recent months and established himself as one of the most well-known investors in the US.
Ackman had envisaged the company along the lines of Warren Buffett’s Berkshire Hathaway: a bedrock in public markets and a member of the benchmark S&P 500. He hoped it would give him a similar draw as the Oracle of Omaha, with annual events drawing thousands of investors. But demand for the IPO did not materialise as he and the bankers leading the listing had expected.
The new investment vehicle was initially expected to price on the New York Stock Exchange as early as this week, but was postponed after Ackman tried to drum up interest in a letter last Wednesday to investors in his hedge fund, Pershing Square Capital.
The letter was later disclosed in a regulatory filing, and in an unusual move, the company disclaimed the note.
The announcement comes after a challenging week for the hedge fund billionaire, as the float’s fundraising target dropped from $25bn to $2bn and a crucial investor backed out.
While he said the company had received “enormous investor interest” in the listing, during meetings in recent weeks, Ackman, the founder and chief executive of Pershing Square Capital Management, evaluated whether investors would be “better served waiting to invest in the after-market than in the IPO”.
“This question has inspired us to re-evaluate PSUS’s structure to make the IPO investment decision a straightforward one,” Ackman said in a statement on Wednesday.
In recent weeks, potential investors expressed concerns that Ackman’s new vehicle might trade at a discount to the net assets held by the fund after the IPO, an issue that has plagued his London- and Amsterdam-listed vehicle Pershing Square Holdings. This is a unique problem for closed-end funds, since they are publicly tradable but stakes cannot be easily redeemed for cash like an ordinary fund.
Pershing Square declined to provide additional comment.
“This is not normal,” said one banker involved in the deal. “To Bill’s credit he was trying to do something very different and obviously it didn’t come together the way he wanted here. I’m sure he’ll consider other things and other ways to do it.”
In the letter to investors last week, Ackman said the listing had received a $150mn commitment from Boston-based hedge fund Baupost Group and $60mn from the Teacher Retirement System of Texas. After the letter was publicly disclosed, Baupost pulled its backing for the IPO.
Banks often use anchor investors to signal strong levels of demand in an IPO, as well as indicate a receptive after-market trading environment. It is rare for an anchor investor to bow out on the cusp of a flotation, and Baupost’s decision to stay on the sidelines would have undercut Pershing Square’s pitch to other possible backers.
Ackman has swept into public view before. He notoriously lost a tremendous amount of money by shorting the multilevel marketing company Herbalife, betting about $1bn that the stock would plummet. He was painfully squeezed when hedge fund titans Carl Icahn and Dan Loeb took the other side of the wager by building up stakes in the company.
Pershing Square also lost more than 80 per cent of its investment on Valeant Pharmaceuticals — a bet that Ackman called “the worst investment in the history of the firm”. The two soured bets led to a more than 30 per cent decline in the value of the hedge fund’s portfolio, Ackman said in a video for the Pershing Square USA IPO roadshow.
“The public markets shorted the stocks we owned, and went long the one stock we were short,” he said.
In recent years, Pershing Square Holdings has performed far better, returning 183.8 per cent over the past five years to June 30.
Ackman had big plans for Pershing Square USA. In addition to investing in large public companies he viewed as undervalued, he planned to use the permanent capital afforded by the closed-end fund structure to become an anchor shareholder in companies about to go public.
Ackman has embraced social media in recent months, regularly posting political opinions on X and endorsing Republican presidential candidate Donald Trump last month. To investors, he touted his online “notoriety” as a potential boon for the public listing, especially among retail investors who would not otherwise have access to Pershing Square’s returns.
