Pershing Square Tontine Is Feeling the Pressure, But Hold the Fort

When it comes to PSTH stock, there’s an anonymous quote that’s brought to mind for me. It goes like this: “Timing is everything. If it’s meant to happen — it will. At the right time. At the right place. For the right reasons.” Of course, we don’t know who said these words, but investors in Pershing Square Tontine Holdings (NYSE:PSTH) stock are hoping against hope that the saying rings true.

A picture of a series of cubes stacked up to get taller as they go to the right, with the word SPAC on them.
Source: Dmitry Demidovich/ShutterStock.com

The anxiety around PSTH doesn’t make sense, though, at least to me. Pershing is a special purpose acquisition company (SPAC) — also known as a “blank check company” — which is sponsored by hedge-fund billionaire Bill Ackman.

When I last covered PSTH stock, I spoke at length about Ackman’s credentials — both as a SPAC sponsor and an investment guru. For this piece, though, I won’t rehash old ground. Instead, I want to focus on a recent development that’s happening with PSTH: the stock price.

The price has been oscillating wildly lately. As of this writing, shares are down 2% in the last month and 20% in the last three months. It’s hard to believe that, at their height, the stock changed hands for over $34 apiece. Welcome to the world of SPAC investing, I guess.

But is there a twist in the tale? Considering that Ackman is at the helm, you can never tell. There have been some very near misses with PSTH, such as with Airbnb (NASDAQ:ABNB) for example. However, there are still plenty of fish in the sea. And with shares now trading above the $20 cash redemption value, I believe PSTH could be on the verge of something big.

PSTH Stock Will Explode Sooner or Later

Contrary to what many people will tell you, SPAC investing is not that difficult. First, you find an investment vehicle with a sound sponsor and an effective investment management team. Then, after you invest in said stock, there is an agonizing wait before the merger target is found. When that happens, share prices skyrocket and the SPAC stockholders become net beneficiaries.

At this point, retail investors book their profits and move onto the next trade. However, if the investment shows promise, you can go ahead and retain your stake in order to see it blossom. That typically happens within a year or two.

That said, a lot of research is now in the books regarding how SPAC stocks do post-merger. And to be honest with you, there aren’t many winners left standing after the dust settles.

However, this is not a zero-sum game. For every Nikola (NASDAQ:NKLA) — which has struggled post-pandemic — there can also be a Draftkings (NASDAQ:DKNG) that does quite well.

When it comes to PSTH stock, though, you should invest in it purely for the short-term profits, in my opinion. That is not to say that Ackman will find a dud. On the contrary, I believe he has the business acumen for finding an excellent unicorn — “a startup company with a value of over $1 billion.”

But that should not be the main motivating factor for buying this stock. Instead, you should look forward to the inevitable pop that shares will receive once a merger target is announced. In fact, we’re already seeing that anticipation manifest right now, with shares jumping after Ackman gave a cryptic update on the SPAC.

What Are Some of the Options Out There?

As far as targets go, Pershing Square Tontine is looking at employee-owned and family-controlled businesses as potential targets. It has until July 21, 2022, to find a suitable company. As I have said before, I believe that is plenty of time for the ace executive to pick a winner.

However, some investors have been getting cold feet because of the delay. That’s understandable, considering the plethora of quick-buck options out there. But Ackman is aware of the investor anxiety. According to Reuters, he said the following back in March:

“Eight months since PSTH’s launch, we remain convinced that an investment in PSTH will generate highly attractive long-term returns, even from PSTH’s current stock price […] 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.”

At this point, the biggest potential deal out there for PSTH stock would be taking a slice of the Bloomberg empire public. That said, this is not the only option.

Recently, InvestorPlace’s Tom Taulli wrote an exceptional article detailing some of the big-ticket names that are available and looking for a dance partner. These included the home-improvement chain Menards, the Wawa gas-station chain and of course the extremely relevant social media platform, Reddit.

My personal favorite in Taulli’s list, however, is Outsystems. That company has built up a platform for low-code that allows the creation of “sophisticated enterprise apps without having to understand computer languages.”

Hold the Fort with PSTH Stock

So, what’s the bottom line for Pershing Square Tontine Holdings?

If you purchased PSTH stock as part of its initial public offering (IPO), I suggest you hold onto it for a little bit. Heck, even if you sold off the stock and were looking for a better entry point, now may be a good time (although you should closely consider the recent pop).

Even though this name has only offered an excruciating wait so far, this SPAC could have all of its ducks in a row soon. I could see it making for a fantastic summer.

On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.


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