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On SPAC Stage, Pershing Square Tontine Holdings Is Godot to $35 Investors

With Pershing Square Tontine Holdings (NYSE:PSTH) closing Aug. 16 at $20.13 a share, it’s closing in on its “strike price” of $20. If PSTH doesn’t buy anything, you get your $20 back.

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

This may seem like a good reason to buy some PSTH stock today. All the risk has gone out of it.

But it’s a bit like going to Samuel Beckett’s play Waiting for Godot. There’s only one thing the average person knows about that play. Godot doesn’t show.

PSTH Stock’s a No Show

Godot, in this case, is the “big deal” that Pershing Square hedge fund head Bill Ackman promised when he put PSTH together a year ago. In one of the market’s more complicated structure of warrants and promises — most special purpose acquisition company deals have a strike price of $10 — only originally costing investors twice as much. At $20, Ackman was already giving you more!

Then came Ackman’s agreement equally complicated brainstorm for PSTH to buy a piece of Universal Music Group. He expected the Securities and Exchange Commission (SEC) to approve PSTH taking 7% of a company listed on a foreign exchange, then trade it in the U.S. But Donald Trump isn’t in office anymore. As regulators stared at the hedge fund manager gimlet-eyed over their green eyeshades, he backed away. Eventually his own Pershing Square took the stake.

It’s a huge comedown. At one point in February PSTH stock traded at $32.50. Investors greedily rubbed their hands wondering what Ackman might do with their money. Rumors swirled. Will he buy Coinbase Global (NASDAQ:COIN)? Will he buy Pornhub? Will he buy the Subway sandwich franchise?

The PSTH S-1 promised something with “predictable, growing cash flows, in an area with high barriers to entry, an attractive valuation and exceptional management.” But Ackman is no more capable of finding one than, say, I am. (Maybe less so. I own shares in Microsoft (NASDAQ:MSFT).)

It may all seem harmless, but it’s not. PSTH is a real stock. People really traded it on rumors. They bought options in it. Some bought it at $35. Those people are out of luck.

SPAC Boom Busted

One thing seems clear. The lack of talk about PSTH on Reddit is good evidence that the SPAC boom has busted.

As I wrote in April, with regard Churchill Capital IV, now Lucid Motors (NASDAQ:LCID), SPAC sponsors can’t use idiotic projections to fuel their deals. They can be held legally responsible for them, just as with any IPO. They also can’t call warrants, the options private investors get in these deals, equity if they’re tied to the SPAC’s value. They’re liabilities.

What Happens Now?

While PSTH may look like a can’t-lose proposition, there is a time value to money. You might be wasting your time. As I wrote in dissing PSTH last March, investors are buying Ackman’s track record.

Excuse me if I’m not impressed.

This is the genius who shorted Herbalife (NYSE:HLF) and could seem to let go. This is the dude who rode Valeant into the ground. Yes, he was right in predicting the pandemic wouldn’t crash the market. But he’s not getting into Starlink either.

What Bill Ackman likes most is Bill Ackman’s reflection in the mirror. Your purchase of PSTH stock is just a proxy for his own self-regard.

The Bottom Line

If you bought into the SPAC hype, I’m sorry for you.

If you’re a small investor, you should buy real companies, not hot air. There are lots of such companies available. Buying a SPAC just means you’re letting someone else go shopping for you.

A mutual fund or exchange-traded fund would be better. At least an ETF lists its holdings. Here, kid. Try some ARK Innovation ETF (NYSEARCA:ARKK).

On the date of publication, Dana Blankenhorn held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.


Article printed from InvestorPlace Media, https://investorplace.com/2021/08/on-spac-stage-pershing-square-tontine-holdings-is-godot-to-35-investors/.

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