On April 13, Bill Ackman kicked off the marketing plan for his upcoming intial public offering (IPO), beginning the process to raise $5 billion to $10 billion for his Pershing Square fund as part of a combined IPO. The roadshow will pitch the IPO to investors with a dual structure. The U.S. Securities and Exchange Commission (SEC) filing does not mention a specific IPO date, but the financial media consensus expects that it will happen on April 28.
The Pershing Square IPO is structured as a combined IPO involving two entities: Pershing Square USA (PSUS) and Pershing Square Inc (PSI). PSUS is intended to be a closed-end fund. This means that after raising funds, it will trade on the stock exchange, allowing fund managers to deploy capital for the long-term without having to worry about redemptions.
Investors who sign up for the IPO will receive PSUS shares priced at $50, with a minimum subscription of 100 shares. On top of this, they will be assigned shares of PSI for no additional cost (20 shares for every 100 shares of PSUS). This dual structure allows investors to profit from both the fees generated by the fund and the portfolio itself. Both entities will trade separately on the New York Stock Exchnage after the IPO under the symbols PSUS and PS.
If you like Bill Ackman, the answer as to whether you should buy this IPO is probably yes. The IPO is essentially a bet on Ackman’s track record. In fact, he has already attracted $2.8 billion in private commitments, which shows institutional interest is high even before the offering.
The fact that Bill Ackman can deploy capital for the long run without having to deal with redemptions is, in part, what is attracting so much capital. This ability to deploy capital without any pressure is why the fund is also being compared to Warren Buffett’s Berkshire Hathaway (BRK.A), which has a tremendous track record itself.
As mentioned above, the dual structure gives investors the chance to trade the fund just like they would a stock, benefit from the portfolio appreciation, and also gain from the fees generated by the fund through exposure to Pershing Square Inc. This hybrid return profile is almost a signature move from Bill Ackman, who is known for his innovation and outrageous bets. Ackman launched Pershing Square Tontine Holdings (PSTH) back in 2020 and marketed it as an improvement on special purpose acquisition companies (SPACs), but failed to close any deal. Ackman has also had trouble convincing regulators at times, but that is a cost of innovation and shouldn’t necessarily be held against the fund manager.
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