Today, famed investor Bill Ackman appears to be in some hot water. Various reports of a lawsuit that has been filed against Pershing Square Tontine Holdings (NYSE:PSTH) has poured more cold water on the SPAC (special purpose acquisition company) sector, as well as the reputation of this high-profile investor. Accordingly, PSTH stock is in the spotlight today for investors. Shares of PSTH stock are currently down approximately 0.4%.
Indeed, this rather small decline today perhaps indicates that investors aren’t as concerned with this lawsuit as headlines suggest they should be. Perhaps part of this is due to the reputation of the SPAC’s founder. Bill Ackman has been in the limelight in recent years for various successful high-profile bets. His hedge fund has performed well. Accordingly, investors have increasingly looked to Mr. Ackman for the latest and greatest deal. Upon the launch of PSTH, many investors sought outsized returns and bought in heavy early on.
However, shares of PSTH stock currently trade right around par value. Currently, PSTH stock can be had at roughly $20 per share. Today’s lawsuit news has done little to move the stock, largely because it’s already fallen more than 40% from its peak.
That said, let’s take a look at what investors may want to know about this lawsuit.
Lawsuit Hits PSTH Stock Today
The lawsuit filed today requests that the special status attributed to PSTH, as a special purpose acquisition company, be revoked. Plaintiffs allege that PSTH is structured as an investment company. This is a big difference. The plaintiffs in this case happen to be former U.S. Securities and Commission (SEC) commissioner Robert Jackson and Yale law professor John Morley — two formidable foes.
These gentlemen suggest that Ackman’s compensation of hundreds of millions of dollars is unfounded. The plaintiffs suggest that the compensation awarded Ackman and the management team is illegal. Accordingly, the lawsuit seeks intervention specifically with how warrants are issued in the SPAC process.
SPACs have come under fire from regulators in the past. Indeed, these investment vehicles remain a topic of discussion among those in the SEC. While not new, reverse mergers have become much more high-profile since last year, which saw a boom in SPAC interest from investors. It appears the plaintiffs in this case are banking on increased public interest in seeing SPACs regulated, as a way to protect investor interests.
What ultimately comes of this lawsuit remains to be seen. However, whatever decision arises from this case is likely to have wide implications for the SPAC community. We will continue to follow any new developments for readers.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.