Pershing Square Tontine Holdings Still Seeks Its Perfect Match

For a brief, glorious moment, Bill Ackman threw a monkey wrench into the SPAC (special purpose acquisition company) world with the June 2021 announcement that his Pershing Square Tontine Holdings (NYSE:PSTH) would acquire a 10% stake in Universal Music Group (UMG). The deal was essentially a stock purchase and not a merger or company acquisition.

A 3D illustration of the word SPACs on a stock board full of numbers and up and down arrows.
Source: iQoncept/

PSTH did not try to acquire a cloud-based robotic software automation blockchain artificial intelligence quantum computing company. It instead wanted to invest in Taylor Swift, Kendrick Lamar and Bob Dylan. (the times, they are a-changin’ …)

UMG appears to be a Bill Ackman-style stock, as he one of the most high profile value and activist investors out there. It is a high-quality, well-managed business with growing and predictable cash flows. Currently UMG is 80% owned by French conglomerate Vivendi (OTCMKTS:VIVHY) and 20% owned by Tencent Holdings (OTCMTS:TCEHY).

PSTH’s press release on the deal really tried to sell it. The document provided an even more detailed list of positive attributes of UMG, including:

  • Massive and growing total addressable market. Everyone loves music!
  • Global consumer adoption of streaming will generate many years of high growth
  • Irreplaceable owned IP and must‐have content
  • Predictable, recurring revenue streams that require minimal capital despite high growth
  • Significant fixed‐cost expense base allowing for long‐term margin expansion
  • Minimal financial leverage (<1x Net debt / EBITDA)

Back to the Drawing Board

Not everyone was happy about the announcement, but it certainly promised to be an interesting tie-up — and a different way for a SPAC to approach the market.

However it was not meant to be.

On July 19, PSTH announced it was not going to complete the transaction. Bill Ackman stated:

“Our decision to seek an alternative initial business combination (‘IBC’) was driven by issues raised by the SEC with several elements of the proposed transaction – in particular, whether the structure of our IBC qualified under the NYSE rules,”

Ackman will now pursue a typical SPAC combination, and investors will go back to waiting to hear what the target will be.

The Ackman Effect and PSTH Stock

So does the deal falling through mean PSTH stock should be avoided? Not at all.

Investors (traders) nowadays focus way too much on themes, memes and charts. It’s not a bad way to make money in raging bull markets, but for investors and companies to survive over a complete market cycle, it still boils down to people. This means savvy investors who have been through these cycles and corporate management teams who understand that a long-term time horizon matters. The sort of leaders who don’t just focus on short-term stock boosterism to make a quick buck.

Bill Ackman often gets mischaracterized as a traditional “activist” investor where in reality he is a pure value investor. Principles such as focusing on what you’re paying for a company versus what its worth —  as well identifying reasonably predictable cash flows in a business — have served him well.

Going against the grain and being a contrarian has also been a factor in his investing style (to wit, his current use of a SPAC). Lastly, focusing on avoiding permanent loss of capital as opposed to rapid and extraordinary short-term gains will pay off in the next downturn.

And when it comes to PSTH in specific, although the whole blank check concept makes investing in a pre-deal SPAC very risky, having Bill Ackman at the helm reduces a substantial amount of that risk.

On the date of publication, Tom Kerr did not hold a position in any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Tom Kerr has worked in the financial services industry for over 25 years. Currently he is a Senior Portfolio Manager at Rocky Peak Capital Management. Prior to that he was Chief Investment Officer and Director of Research of SGL Investment Advisors, and has served in a number of positions at other investment related organizations. Mr. Kerr has also been a contributing writer to and He’s a CFA charterholder and obtained a B.B.A in Finance from Texas Tech University.

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