Why Pershing Square Tontine Holdings May Finally Be Worth Buying

The gig may be up for many, but when it comes to Pershing Square Tontine Holdings (NYSE:PSTH), is the game over before it even began?  Let’s take a look at what’s happening off and on the price chart of PSTH stock, then offer a risk-adjusted determination aligned with those findings.

An image of wooden blocks that say SPAC over a series of one dollar bills.
Source: Dmitry Demidovich/ShutterStock.com

ChargePoint Holdings (NYSE:CHPT). QuantumScape (NYSE:QS). Lordstown Motors (NASDAQ:RIDE). Opendoor Technologies (NASDAQ:OPEN). Golden Nugget (NASDAQ:GNOG). In today’s more cautious market environment, one of last year’s riskier thematic trades has crumbled. And that includes PSTH stock, well kinda sorta.

Those fingered above are but a handful of special purpose acquisition (SPAC) or blank-check companies which came public through reverse mergers with non-public companies positioning within exciting, up-and-coming growth markets such as alternative energy, online gaming and fintech. And they’ve all taken big hits this week.

Regarding PSTH, Thursday’s decline of 8% puts the stock’s overall correction near 27% from its February high. It’s unnerving to be sure. But optimistically, there are reasons to be hopeful this isn’t the start of something more ominous and will prove a nice buying opportunity.

So, who or what is Pershing Square Tontine? PSTH stock is the offspring of well-known activist hedge fund manager Bill Ackman. And despite taking a couple lumps over the past decade, his longer-term performance and record-beating returns over the last couple years have put him among the elite in the financial industry. That’s not all though. There’s more to buying PSTH that’s inviting as well.

Over the past week Ackman has temptingly made Pershing shares a more worthwhile investment by dangling the possibility for its investors to buy in at the IPO price of his next recently filed PSTH-II SPAC. That would be nice, right? But what about PSTH and moreover, its acquisition? The thing is, and unlike many SPACs, Pershing Square has yet to find a mate.

Green Eggs & SPAC

What little is known of the pending purchase is Ackman’s desire to buy a more “mature unicorn” valued in excess of $1 billion. It’s a strategy that differentiates itself from most of today’s recent SPAC mergers. A disproportionate number of those deals have been with still-unproven concept companies in glamorous growth markets.

In buying PSTH stock, investors are also wagering on Ackman’s track record and promise that his experience, size, and connections should produce a superior merger choice. Fueling those flames, this week Elon Musk ushered in a new wave of speculation SpaceX could be within reach of PSTH. On Twitter, the ever-cryptic Tesla (NASDAQ:TSLA) CEO teased investors with four words, “Green eggs & SPAC” on his feed following the cancel culture shake up involving select Dr. Seuss books.

PSTH Stock Weekly Price Chart

Pershing Square Tontine Holdings (PSTH) corrective double bottom


Source: Charts by TradingView

In Bill or PSTH stock we trust? Today, I believe investors can do both. As it stands, the price chart of Pershing Square has cracked beneath a pair of bullish channel lines. It could be bearish. But charts aren’t controlled by singular patterns defined by the laws of physics with guaranteed outcomes. If it were that easy, who would take the other side of the trade?

In the case of PSTH’s weekly chart, I’m more positive on shares having entered an area where some variation of a double bottom pattern can play out. That makes sense given the size of the stock’s correction. The thing is all stocks correct. And at 27%, with 30% being a fairly common bearish reaction for a stock of PSTH’s stature, it’s close enough to begin thinking along those lines. As well, and with shares stationed in-between the lifetime 62% and 76% retracement levels and stochastics just touching oversold readings, there are even more reasons to be monitoring PSTH for a nearby buy decision.

Given the larger volatility associated with this week’s plunge, buying PSTH looks approachable if the stock can simply hold above the lower Fib support near $24.50 while stochastics begins to flatten or ideally crossover. Bottom-line though, for those investors that wish to turn trust into a more certain outcome, an adaptive collar strategy for any future stock purchases is looking more relevant than ever.

On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100%  the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


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