Pershing Square Tontine Holdings, a blank check company formed by Bill Ackman of Pershing Square targeting "Mature Unicorns," filed on Monday with the SEC to raise up to $3 billion in an initial public offering, which would make it the largest SPAC ever.
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The New York, NY-based company plans to raise $3.0 billion by offering 150 million units at $20. Each unit consists of one share of common stock and one-ninth of a redeemable warrant, exercisable at $23; common shares also have a right to receive two-ninths of a warrant provided that they are not redeemed in connection with a proposed business combination. At the proposed deal size, Pershing Square Tontine Holdings would command a market value of $3.0 billion, as the structure does not have the typical 20% founder shares ("sponsor promote").
Sponsor Pershing Square has committed to a forward purchase agreement in which it will buy $1.0 billion worth of units at $20 per unit upon the closing of an acquisition; these units will consist of one share of common stock and one-third of a warrant. Pershing Square may elect to purchase an additional $2.0 billion worth of units under the same terms.
As a result of the IPO and committed purchase agreement, the SPAC expects to have a minimum of up to about $4.0 billion in equity capital, subject to standard share redemptions, and as much as $6.45 billion including the additional $2.0 billion in forward purchase units and up to $450 million under the underwriter overallotment. If the SPAC's cash consideration represents 15% of the value of its acquisition target, Pershing Square Tontine Holdings could acquire a unicorn worth roughly $25 billion to $45 billion, which is higher than the private valuation of the largest US unicorns.
Pershing Square Tontine Holdings is led by CEO and Chairman William Ackman, the founder and CEO of Pershing Square Capital Management, and CFO Ben Hakim, a Partner at Pershing Square. Independent directors are Lisa Gersh, former CEO of Alexander Wang, Goop, and Martha Stewart and co-founder of Oxygen Media; Michael Ovitz, co-founder of Creative Artists Agency (CAA), Broad Beach Ventures, and senior advisor to Palantir Technologies; Jacqueline Reses, head of Square Capital and formerly the CDO of Yahoo! and head of the US media group of Apax Partners; and Joseph Steinberg, Chairman of Jefferies Financial Group.
The company is targeting "Mature Unicorns," or private, large capitalization, high-quality, growth companies where its ownership in the merged company would generally represent a minority of shares outstanding at the time of the merger. The SPAC states that its targets will likely be candidates for inclusion in the S&P 500 index.
Pershing Square Tontine Holdings was founded in 2020 and plans to list on the NYSE under the symbol PSTH.U. Pershing Square Tontine Holdings filed confidentially on May 20, 2020. Citi, Jefferies, and UBS Investment Bank are the joint bookrunners on the deal; CastleOak Securities, Loop Capital, Ramirez & Co., and Siebert Williams Shank are co-lead managers.
This SPAC has an unusual structure. The blank check company is pricing its units at $20 instead of the usual $10. IPO investors also receive just 1/9 warrant per $20 unit, instead of the typical 1/2, 1/3, or 1/4 warrant per $10 unit. Unlike most SPAC common shares, these will include a right to receive 2/9 of a warrant if the shareholder does not redeem, incentivizing shareholder approval of a proposed transaction. Pershing Square's forward purchase units contain 1/3 warrants, similar to an IPO investor who does not redeem. Pershing Square has not granted itself free founder shares, typically worth 20% of what the company raises in an IPO, though it will still have a 20% voting stake due to a nominal number of supervoting Class B shares. The sponsor's at-risk capital covering upfront underwriter fees and related expenses totals $45 million; in exchange, the sponsor will receive warrants granting the right to purchase 5.95% of the common shares of the post-combination entity on a fully diluted basis at an exercise price of $24 per share. Therefore unlike a typical SPAC, Pershing will not realize a return if the SPAC's shares trade under water following the business combination.
