Billionaire investor Bill Ackman’s special-purpose acquisition company (SPAC) is close to agreeing a transaction with Universal Music Group that would value the music titan at $40 billion, The Wall Street Journal reported on Thursday, citing people familiar with the matter.
Ackman’s Pershing Square Tontine Holdings might finalize the megadeal in a matter of weeks, although it could still fall through, sources told The Journal. PSTH shares fell as much as 8% in aftermarket trading after the news broke.
Universal Music, which represents artists including Taylor Swift and Billie Eilish, is currently owned by Vivendi, a French media conglomerate. The segment grew constant-currency revenue by 5% to 7.4 billion euros ($9 billion) last year, and operating income by 20% to 1.4 billion euros, Vivendi’s latest annual report shows.
Vivendi disclosed in mid-May that it was considering selling 10% of Universal Music to an “American investor” – which may be Ackman – or pursuing a public offering of 5% to 10% of the segment’s shares. Tencent, a Chinese technology conglomerate, doubled its stake in Universal Music to 20% last year, valuing the business at 30 billion euros.
Ackman, the boss of Pershing Square Capital Management, said last month that his team had identified an “iconic, phenomenal, great business” back in November 2020, and he hoped to strike a deal to purchase a piece of it within the next few weeks. He said the target was so attractive and interesting that it was “worth the energy and the effort.”
The hedge fund manager took PSTH public last summer with the goal of spending around $5 billion for a minority stake in a private business. Ackman’s reputation as a top investor – boosted by his lucrative pandemic hedge and his fund’s 70% gain last year – and the size of his SPAC prompted intense speculation about his possible target.
Pershing Square Capital Management declined a request for comment from Insider.
The billionaire hedge fund manager told investors on a Wednesday call that he will make an announcement whether his Pershing Square Tontine Holdings SPAC gets a deal done with the current target or has to move on.
The uncertaintly is making retail investors anxious. The story from Institutional Investor found sentiment was low on a “PTSH support group” page comprised of retail traders. One told the magazine that it “seems like the deal won’t happen” as Ackman keeps mentioning the idea of a backup target.
His SPAC – which launched with the goal of spending $5 billion to take a private business public – started working on a transaction in early November.
“We’ve done our homework, we like the business, we love the management team, and we are working to complete a transaction, as I said within weeks,” he said on the call, according to a transcript from Seeking Alpha.
“If we cannot get this transaction done, we will move on to target number two, and there are other interesting opportunities for us to pursue,” he added.
Following Ackman’s comments, shares of Tontine, which went public in July 2020 under the ticker PTSH, declined, closing out the day 1.2% lower.
According to a Monday filing with the Securities and Exchange commission, Tontine said it’s “currently in negotiations with a specific business target and while substantial progress has been made, significant issues remain to be addressed before a transaction can be announced and consummated, if at all.”
Several institutional investors have sold all or some of their positions in the SPAC, though its early backers are still in place. Hedge Fund Soroban Capital sold its stake of 5 million shares, Taconic Capital sold half of its 1.1 million shares, and the Ontario Teachers Pension Plan sold 4.3 million shares, though that was only part of its investment, Institutional Investor reported.
But early backers Guggenheim Capital and Baupost Group still hold tens of millions of shares in Ackman’s SPAC.
On The Wall Street Journal’s “The Future of Everything Festival,” Ackman said he and his team found an “iconic, phenomenal, great business with a great management team that meets all of our criteria.” But, the nature of the target, the complexity of the deal, and other issues have caused delays, he said, adding that the company is so attractive it will be “worth the energy and the effort.”
Billionaire investor Bill Ackman hopes to close his mega-SPAC deal in the next couple of weeks, continues to hedge against inflation and a potential market downturn, and swapped out Starbucks for Domino’s Pizza in search of higher returns, he said on an earnings call this week.
Ackman’s “blank-check” company, Pershing Square Tontine Holdings, floated last summer with the goal of spending about $5 billion for a minority stake in a private company and taking it public. The investor revealed earlier this month that he’s been working to buy a piece of an “iconic, phenomenal, great business” since early November, and was close to sealing the deal.
“We’ve done our homework, we like the business, we love the management team, and we are working to complete a transaction,” Ackman said this week. “Hopefully within a couple of weeks or so.”
If the deal falls through, Ackman and his team will turn their attention to a second target, he added.
Ackman, who made a $2.6 billion profit by hedging the pandemic last spring, also weighed in on growing inflation fears and the steps he’s taken to protect his portfolio. He pointed to multiple government-stimulus packages over the past year, and the prospect of pent-up demand being released and savings being spent as the economy reopens, as drivers of higher prices that could spur the Federal Reserve to hike interest rates. That represents a “risk for markets generally,” he said.
The uncertain backdrop prompted his fund, Pershing Square Capital Management, to spend $157 million on interest-rate “swaptions” between December and early February. The position’s value – which ballooned to almost $500 million by the end of March – is still up about 2.5 times, Ackman said.
The Pershing chief also elaborated on why his fund sold a 1% stake in Starbucks and snapped up more than 5% of Domino’s – a position valued at about $750 million as of March 31 and $860 million today. The move was driven by price and potential upside, he said.
“We’re always willing to trade an existing holding at a kind of full valuation for a business of similar quality at a much more attractive valuation,” Ackman said. “That was the thinking behind the switch.”
The investor and his team determined that Starbucks was likely to generate returns in the low double digits, while Domino’s promises long-term returns in the high teens or low 20s, he added.
Billionaire investor Bill Ackman swapped out Starbucks for Domino’s Pizza and trimmed all but one of the other holdings in his stock portfolio last quarter, a regulatory filing revealed this week.
Ackman’s Pershing Square Capital Management sold its almost 1% stake in Starbucks, which was worth $1.1 billion at the end of December. The hedge fund also bought more than 5% of Domino’s Pizza – a position valued at about $750 million as of March 31.
Ackman explained the move at a recent Wall Street Journal event. Starbucks stock had rebounded faster than expected, he said, while Domino’s stock slumped in March to its lowest since the pandemic tanked markets last spring.
“We’ve admired it for years, and it was just never cheap enough,” Ackman said about the pizza-delivery chain. “Then for about five minutes, it got cheap. I don’t know who sold or why, but we started buying around $330 a share, and then very quickly it moved up a lot.”
Pershing’s newest position has jumped in value by another 18% since March 31, to over $880 million as of Monday’s close.
Ackman and his team also reduced their stakes in Agilent, Lowe’s, Hilton, and Restaurant Brands by 3% to 4%, and their Chipotle stake by around 6%. In contrast, they boosted their Howard Hughes position by about 23% to 13.5 million shares.
Pershing’s stake in Lowe’s was worth $2.3 billion at the end of March, making the home-improvement retailer its most valuable holding. Its Agilent, Chipotle, Hilton, and Restaurant Brands positions were worth about $1.5 billion each, while its Howard Hughes stake was valued at $1.3 billion. The overall value of its stock portfolio grew 5% to $10.5 billion.
Ackman’s next major update could be related to his $5 billion special-purpose acquisition vehicle, Pershing Square Tontine Holdings. The investor is hoping to announce a deal to buy a minority stake in an “iconic” private business in the next few weeks.
The billionaire investor said his team has identified an “iconic, phenomenal, great business with a great management team that meets all of our criteria.” They have been working since early November to buy a piece of it, he added.
The hedge fund manager listed Pershing Square Tontine Holdings, a special-purpose acquisition company or SPAC, on the stock market last summer. Its goal is to spend about $5 billion for a minority stake in a private business and take it public.
The nature of its chosen target, the complexity of the transaction, and various other issues have delayed the process, the Pershing Square Capital Management boss said. However, he believes the company in question is so attractive and interesting that it will be “worth the energy and the effort.”
Ackman reiterated that PSTH’s goal is to buy a “super-high quality, durable, growth business.” He paraphrased a famous quote by his mentor Warren Buffett to make his point.
“What we’re looking for is a business that you can own for the next decade,” Ackman said. “The stock market could shut and you would have enormous confidence the business would be worth multiples of the price you pay today.”
Ackman now believes he’s close to securing a stake in that kind of company, but cautioned the deal could still collapse. “We’re either gonna get a transaction done in the next relative short term – weeks – or we’ll be onto the next one,” he said.
The Pershing Square chief made other notable comments at the virtual festival. His hedge fund has sold its Starbucks stake and bought about 6% of Domino’s Pizza, he revealed.
Ackman also cautioned that the recent spike in inflation might not be temporary, and predicted the Federal Reserve will raise interest rates. Moreover, he described cryptocurrencies as a “brilliant technology” but said he wasn’t comfortable owning a meaningful amount of them.
Billionaire investor Bill Ackman warned inflation may not be temporary and said the Federal Reserve may have to raise interest rates in a Wednesday interview at the Wall Street Journal Future of Everything Festival. The Pershing Square Capital Management founder also revealed that his fund recently purchased a 6% stake in Domino’s Pizza, sending the shares up as high as 5.9% Wednesday.
Here are 12 of Ackman’s best quotes from the interview, lightly edited and condensed for clarity:
1. “We’ve admired it for years, and it was just never cheap enough. And then for about five minutes, it got cheap. I don’t know who sold or why, but we started buying around $330 a share, and then very quickly it moved up a lot,” on his decision to buy a 6% stake in Domino’s pizza during the pandemic.
2. “The surprise numbers that came out are not due to any weakness in the economy. The economy is crushing it. Businesses are booming. If you think about hospitality, you can’t get a reservation in New York anymore,” on the jobs report that badly missed estimates last week.
3. “There are plenty of jobs, people haven’t had to work partially because of the stimulus…When unemployment benefits step back and some of the stimulus wears off, there will be more of a supply of labor.” He added that raising wages is good for workers and the economy because workers will spend money.
4. “They’ve got a great product, a great value where they do have pricing power. And so they’re able to offset the incremental costs of paying higher wages with charging a little bit more for a burrito. You charge 50, 60, 70 cents more for burrito, you can pay your workers more, and it’s still very good value to consumers. The key in a world where there’s going to be inflation and there’s going to be wage inflation is to have a business that sells a product where there’s pricing power,” on Chipotle raising wages. (Ackman’s Pershing Square owns Chipotle stock.)
5.”I think it’s not temporary….Look at every commodity price right? Copper, lumber, energy even before the colonial pipeline issue. Look at housing prices, look at Bitcoin right? Everything is inflating. That’s driven by a once in a moment history. People are emerging from a pandemic with the endless spirit that comes from being locked up,” on inflation.
6. “I think they’re going to have to raise rates for sure. And I think they adjusted their policy just at the wrong time. Preemptive policy toward inflation I think is a better approach, particularly in a world where we have massive, massive economic stimulus,” on The Federal Reserve.
7. “I think with rates where they are, there’s a very good risk of the economy overheating.”
8.”I think crypto is a fascinating phenomenon. I think it’s a brilliant technology and I kick myself for not understanding it, it’s one of the best speculations ever… But it’s not a place where I would feel comfortable personally putting any meaningful amount of assets in. Therefore I wouldn’t invest our firm’s assets.”
9.”There’s no intrinsic value. Intrinsic value to me is driven by cash generation. You have to be able to build a discounted cash flow calculation,” on why he’s not comfortable investing in bitcoin.
10. “I would be concerned if a friend had a lot of their net worth invested in, in one or more cryptocurrencies, I’d want them to take some money and put it into something a little more durable.”
11. “New York is an extremely desirable place to live. It is a big tax burden and when high-income people do the math and they say, well, I could move to Florida and buy this amazing house and not the state taxes, it motivates some people, but…One of the benefits of being successful is you can choose where you live. So to run away from a location because the tax rate is higher, it seems kind of silly,” on the migration from New York to Miami and his decision to keep Pershing Square in Manhattan.
12. “I think it’s very, very important who the next mayor of New York is, and that we actually have a pro-business mayor. The mayor of Miami has done a great job recruiting technology executives. The next mayor of New York has to do the same thing.” He added that Raymond McGuire and Andrew Yang are both great candidates for mayor.
“I think one of the ‘black swan’-type risks for markets is a real spike in inflation that’s not just a three-month spike, that’s more sustained,” Ackman said. “Also, meaningfully higher interest rates, which I think will affect the discount rates that people use to value companies. And I think those could be countervailing stock-market forces.”
A “black swan” event is a rare and unpredictable event that could have severe consequences.
The Pershing Square Capital Management founder said that the trillions of dollars in stimulus from COVID-19 relief bills and President Joe Biden’s infrastructure proposal, historically low interest rates, and “benign policy” from the Federal Reserve would set the US up for “explosive GDP recovery and probably inflation.”
Ackman said he thought that with the pace of vaccinations, the US would be close to full employment and near all-time low unemployment rates at the start of 2022 – factors for the Fed to change policy.
“I think you could see certainly expectations change as soon as the next few months about how accommodative the Federal Reserve will be,” Ackman added.
More investors have questioned whether inflationary pressures from the economic recovery will be temporary or have a lasting effect on markets. The Fed has signaled that it will keep its accommodative policy stance, which has long driven gains in stocks. The Fed’s chairman, Jerome Powell, has also emphasized that any rise in inflation would be transitory.
But many on Wall Street have predicted that the Fed will need to change its hand sooner than expected and that it will spook markets. The Wharton professor Jeremy Siegel told CNBC on Friday that the Fed would change its policy stance in 2021 and that it would cause a “day of reckoning” in the stock market.
Ackman recommended investors own businesses with pricing power to combat inflation.
“I think inflation is going to be real, and you’re going to see wage inflation. I mean, everywhere there are ‘help wanted’ signs. It’s very hard to hire people to fill its jobs, particularly with a stimulus package which includes extra unemployment benefits,” the investor said. “So it’s a lot of pressure on wages I think, which I think ultimately is a good thing but could have, again, depending on the nature of the business, could have a negative impact.”
Bill Ackman warned that sustained inflation could cause an unexpected tailspin in the stock market in an interview with Interactive Investor published Thursday.
“I think one of the ‘black swan’ type risks for markets is a real spike in inflation that’s not just a three-month spike, that’s more sustained,” Ackman said. “Also, meaningfully higher interest rates, which I think will affect the discount rates that people use to value companies, and I think those could be countervailing stock market forces.”
A “black swan” event is a rare and unpredictable event that potentially has severe consequences.
The Pershing Square Capital Management founder said the trillions of dollars of stimulus from COVID-19 relief bills and Biden’s infrastructure package, historically low interest rates, and “benign policy” from the Federal Reserve is setting the US up for “explosive GDP recovery and probably inflation.”
Ackman said that with the pace of vaccinations in the US, the country will be close to full employment and near all-time low unemployment rates at the start of 2022. Those factors are the triggers for the Federal Reserve to change policy.
“I think you could see certainly expectations change as soon as the next few months, about how accommodative the Federal Reserve will be,” Ackman added.
Ackman’s interview comes as more investors begin to question whether inflationary pressures from the economic recovery will be temporary or have a lasting effect on markets. The Federal Reserve has signaled it will keep its accommodative policy stance, which has long driven gains in stocks, in place for much longer. Chair Powell has also emphasized that any rise in inflation will be transitory.
But many on Wall Street are predicting the Fed will need to change its hand sooner than expected, and that will spook markets. On Friday, Wharton Professor Jeremy Siegel told CNBC the Federal Reserve will change its policy stance at some point in 2021, and that will cause a “day of reckoning” in the stock market.
Ackman recommended investors own businesses with pricing power to combat inflation.
“I think inflation is going to be real, and you’re going to see wage inflation. I mean, everywhere there are ‘Help Wanted’ signs, it’s very hard to hire people to fill its jobs, particularly with a stimulus package which includes extra unemployment benefits,” said the investor. “So it’s a lot of pressure on wages which I think ultimately is a good thing but could have, again, depending on the nature of the business, could have a negative impact”
Billionaire investor Carl Icahn sold his final remaining stake in Herbalife, putting a close to the saga that fueled his long-standing feud with Bill Ackman.
SEC filings from Thursday show that Icahn now holds 0% of the multi-level-marketing nutritional shake seller. In January, the activist investor reduced his share of the company to about 6% from 16% and sold $600 million of stock, saying that the company no longer needed his activism.
Icahn told CNBC’s Scott Wapner on Thursday: “I think this is an example of activism working very well. It was certainly an interesting ride fighting off bear raids as well as aiding the company in their numerous negotiations with the government. But all’s well that ends well and we wish the company the best of luck in the future.”
The nutritional supplement company is at the center of Icahn’s years-long feud with fellow billionaire investor Bill Ackman. Ackman had a $1 billion short position in Herbalife, and publicly disclosed that he believed the company was a pyramid scheme. Icahn became an activist investor in the company, and their arguments over Herbalife came to a head on live television.
In a CNBC interview in 2013, Icahn called Ackman a “liar,” and said to the investor: “I wouldn’t invest with you if you were the last man on Earth.” Ackman slammed back, saying “This is not a guy who keeps his word. This is a guy who takes advantage of little people.”
Hedge fund billionaire Bill Ackman is already planning a second blank-check company, although he expects to miss his own first-quarter deadline to find a first target.
The legendary investor had hoped his special purpose acquisition company (SPAC) would find a target by the end of the first quarter, but now admits this might not happen. Prior targets on the list of his Pershing Square Tontine Holdings SPAC included Airbnb, Stripe, and Bloomberg LP, according to Reuters.
“While we previously believed that we would be able to announce a potential transaction by the end of this quarter, we will not be in a position to do so,” Ackman said in a letter to investors on Monday. “We do not intend to make any announcements about PSTH’s transaction progress until we enter into a definitive agreement.”
Ackman said he believes his SPAC will be an important contributor to the hedge fund’s performance and he will likely launch a second one after completing a first merger. Investors in his first SPAC should have the right to invest in the second one “without paying a premium to its cash-in-trust value,” he wrote in the letter.
Ackman’s PSTH was the highest-profile SPAC among hedge funds in 2020, when SPACs raised $83 billion across 248 IPOs, smashing the previous record of $13.6 billion, according to SPACInsider.com. His SPAC raised a record-breaking $4 billion via proceeds from investors in July last year, along with an added $1 billion commitment from Pershing Square.
While he has not told investors which companies he was looking to take over, a previous filing stated he is drawn to “high-quality, venture-backed businesses” that could be classified as “mature unicorns.” Unicorns are privately-held startups with a valuation of more than $1 billion.
The SPAC has until July 21 next year to sign a letter of intent and six months after that to close a signed deal, according to Bloomberg.
Shares in Pershing Square Tontine fell 1.3% in pre-market trading on Tuesday.