Regulatory News:
Pershing Square Holdings, Ltd. (LN:PSH) (LN:PSHD) (NA:PSH) today
noted that Pershing Square Tontine Holdings, Ltd. (NYSE:PSTH) CEO
Bill Ackman issued the following letter.
August 19, 2021
Dear Pershing Square Tontine Holdings, Ltd. Shareholder,
A purported shareholder filed a lawsuit on August 17th claiming
that PSTH has been operating as an illegal investment company
because, among other claims, PSTH invested its IPO proceeds in
securities (short-term Treasurys and money market funds that own
short-term Treasurys). This is of course something all SPACs do as
they preserve funds necessary to complete their initial business
combinations. As the law professors who brought the case should
very well know (as both are securities law experts), holding cash
and government securities while seeking a business combination does
not make PSTH an illegal investment company, nor does it make any
of the hundreds of other SPACs that do the same, illegal investment
companies either.
While we believe the lawsuit is meritless, the nature of the
suit and our legal system make it unlikely that it can be resolved
in the short term. Even if the case were dismissed expeditiously,
the plaintiff can then appeal. As a result, the mere existence of
the litigation may deter potential merger partners from working
with PSTH on a transaction until the lawsuit is finally
resolved.
Because the basic issues raised here apply to every SPAC, a
successful claim would imply that every SPAC may also be an illegal
investment company. As a result, the lawsuit may have a chilling
effect on the ability of other SPACs to consummate merger
transactions or to engage in IPOs until the litigation is resolved
in PSTH’s favor, as the consequences of being deemed an illegal
investment company are extremely onerous.
PSTH has about 11 months remaining to enter into a letter of
intent with a transaction counterparty for its initial business
combination, and six additional months to close that transaction.
This period may be extended by up to six months by a vote of PSTH
shareholders. While we have been working diligently to identify and
close a transaction, and we have begun discussions with potential
merger candidates, our ability to complete a transaction in the
required time frame has been impaired by the lawsuit.
All is not lost, however. As we have previously disclosed, we
have been working on obtaining approval for the launch of Pershing
Square SPARC Holdings, Ltd. (“SPARC”). If we are successful in
securing SPARC’s approval, and I am confident that we will get it
done, we will have a clear path to mitigate the harm that this
litigation has and will continue to cause to PSTH shareholders and
warrant holders.
Pershing Square SPARC Holdings, Ltd.
We are working to accelerate the launch of Pershing Square SPARC
Holdings, Ltd. (“SPARC”), and expect that we will shortly be making
a public filing of SPARC’s SEC registration statement. As a
reminder, SPARC, which we conceived of months ago and disclosed in
connection with the UMG transaction, is a modified opt-in (rather
than the current opt-out) SPAC structure where investors in PSTH
would receive long-dated, transferable SPARC warrants to acquire
common stock in SPARC, which we expect to be traded on the
NYSE.
SPARC warrants would give investors the right to invest in
SPARC’s future merger transaction at a share price equal to SPARC’s
cash net asset value (“NAV”) per share. The Pershing Square Funds
will be making a large-co-investment in SPARC on precisely the same terms and at the same time
as SPARC warrant holders. The SPARC warrants would not be
exercisable, and warrant holders would not need to invest their
capital, until SPARC has identified a merger target, completed due
diligence, entered into and approved a transaction, and cleared a
registration statement with the SEC, which will provide full
disclosure on the transaction and the target company.
Originally, SPARC intended to issue the SPARC warrants to PSTH
shareholders after PSTH’s initial business combination. In light of
this litigation, we expect that SPARC would issue the SPARC
warrants as promptly as possible after regulatory approvals are
obtained.
While there is no certainty that SPARC will be approved by the
SEC, or that the NYSE rule change will be adopted, we are hopeful
that SPARC’s favorable investor protection features will facilitate
a timely approval. The principal benefit of SPARC is that it would
not hold investors’ money while we are looking for a target. This
eliminates the substantial opportunity cost of capital that burdens
all SPAC investors.
The SPARC warrants will also remove the two-year “shot clock”
for a sponsor to consummate a transaction. This reduces the time
pressure faced by the sponsor, which provides an incentive for SPAC
sponsors to complete transactions before the clock runs out. In a
de-SPAC merger transaction, time pressure on the sponsor is the
enemy of a good deal for shareholders.
We Intend to Seek Shareholder Approval to Return PSTH’s Cash
in Trust If and When SPARC is Approved by the SEC
Assuming SPARC is approved by the SEC and the SPARC warrants are
approved for listing on the NYSE, if PSTH has not by then entered
into a merger transaction, we intend to seek PSTH shareholder
approval to enable us to return to shareholders the $4 billion of
cash PSTH holds in trust. Following the return of cash, we expect
SPARC to issue one SPARC Distributable Warrant for each PSTH
Distributable Warrant, and one SPARC warrant for each outstanding
PSTH common share.
As a result of the above, PSTH shareholders will receive $20 per
share in cash and one SPARC warrant for each share that they own.
This will entitle shareholders to invest in our next initial
business combination at a share price equal to SPARC’s cash NAV per
share, or to sell the SPARC warrants on the NYSE. Importantly, the
launch of SPARC and the distribution of SPARC Distributable
Warrants to PSTH Distributable Warrant holders will give our 22.22
million Distributable Warrants outstanding, which have been put at
grave risk due to this litigation, a new long-term opportunity for
value realization.
Furthermore, we believe that by launching SPARC, we will be able
to continue working seamlessly on a potential merger transaction,
now on behalf of SPARC rather than PSTH, while eliminating the
burden on PSTH shareholders of the opportunity cost from having
their funds held in trust.
Timing of SPARC’s Official Launch and Warrant
Distribution
We have already received a comment letter from the SEC on our
initial SPARC confidential filing, and we believe that we can
address the disclosure and other issues that have been raised by
the SEC staff. The listing of SPARC warrants on the NYSE, however,
will require a NYSE rule change which will be subject to SEC
approval, which we are now pursuing with the NYSE. (See
https://www.nyse.com/regulation/rule-filings for details on other
proposed and approved NYSE rule changes.)
We have spoken extensively with the NYSE about the necessary
rule change to allow the SPARC warrants to trade on the Exchange.
In short, the current NYSE listing rules for warrants require that
the shares into which the warrants are exercisable be listed. Since
SPARC common stock will only become listed when the warrants are
exercised in connection with the business combination, the warrant
listing rule needs to be narrowly modified to accommodate this
distinction.
Based on our discussions with the NYSE, we believe they
appreciate the investor-friendly features of SPARC, and have
offered to work closely with us and the SEC to accelerate the
necessary rule change. Nevertheless, there is no assurance the rule
change will be approved, and it could take several months or more
to secure approval.
While there is no certainty that SPARC will be approved by the
SEC, or that the NYSE rule change will be adopted, we are hopeful
that SPARC’s extremely favorable investor protection features will
permit a timely approval.
SPARC’s approval will allow us to:
- return your cash,
- preserve the opportunity for you to invest in our next business
combination at SPARC’s cash NAV per share, and
- protect the long-term value of the Distributable Warrants by
replacing them with SPARC Distributable Warrants.
As a result of these benefits, we expect that all PSTH
shareholders will be highly supportive of the necessary rule
change.
We welcome your public input on the proposed rule change once it
is filed publicly. Favorable public comments on a rule change are
important factors that are considered by the SEC and NYSE as the
proposed rule change is being evaluated.
We expect shortly to publicly file a revised SPARC registration
statement with the SEC, which responds to the SEC’s initial
comments. This document will provide detailed information about
SPARC. We hope you will find it an interesting read. In the
meantime, we will deal with the litigation in the ordinary course
and address its spurious claims with great care and diligence.
Why you might ask, would a PSTH
shareholder bring such a meritless lawsuit when any shareholder
would understand that the mere filing of the lawsuit, and the
delays inherent in its resolution, would impair PSTH’s ability to
create shareholder and warrant holder value within its remaining
term, by interfering with the process of consummating a merger
transaction?
While the lawsuit is brought on behalf of a purported
shareholder of PSTH, this individual is simply an unwitting prop to
enable the academics, and the plaintiff law firms with whom they
have partnered, to bring the lawsuit. The two law professors who
concocted the legal theory behind the complaint conceded to the
press that their motivation in bringing the lawsuit was “to reform”
the entire SPAC industry.
As the largest SPAC ever, PSTH is an attractive target in that
its scale and visibility maximize media attention for the lawsuit’s
claims and the professors’ proposed efforts at reform. While some
reforms to the SPAC industry – adoption of the SPARC structure
being one – are clearly warranted, we believe that PSTH and its
highly shareholder-aligned structure provide a good example of how
SPAC structures and their incentives for sponsors can be improved
for the benefit of public investors. This litigation only serves to
harm investors in PSTH and all other SPACs. It is not helpful in
achieving SPAC market reform.
Notably, one of the professors who is leading the suit, Robert
Jackson, served as an SEC Commissioner between January 2018 and
February 2020. During his more than two-year term as Commissioner,
the SEC reviewed and declared effective more than 100 SPAC IPO
registration statements, and oversaw dozens of de-SPAC merger
transactions. If Mr. Jackson is so sure that SPACs are in fact
illegal investment companies, why didn’t he take steps to shut them
down while he was an SEC Commissioner?
Beyond Its Shareholder Destructive Elements, the Lawsuit is
Also Materially Misleading
The lawsuit includes misleading statements and inferences, among
them that PSTH’s sponsor, a wholly owned affiliate of the Pershing
Square Funds (the “Sponsor”), has been “promised” “staggering
compensation” of $880 million”. This headline grabbing assertion is
wholly fabricated – none of PSTH’s directors nor its Sponsor has
received or has been promised any compensation of any kind.
As you may be aware, the Sponsor paid $65 million in cash for
the Sponsor Warrants at the time of our IPO. The purchase price for
the warrants was based on their fair value as determined with the
assistance of a nationally recognized, third-party valuation firm.
The Sponsor Warrants have features which increase their alignment
with our shareholders that include a restriction on selling,
hedging, or transferring the warrants for three years after the
initial business combination takes place.
The Sponsor Warrants have the potential of becoming materially
more valuable in the event PSTH is successful in completing a
merger with a company whose stock price increases substantially
over many years. The Sponsor Warrants will likely be worthless if
we do not consummate a high-quality transaction on favorable
terms.
Even if the Universal Music Group business combination had been
completed as anticipated, the Sponsor would not have received any
Sponsor Warrants, as it agreed to waive its right to receive
warrants in that transaction.
Notably, the proposed then abandoned
PSTH/UMG de-SPAC transaction is the only SPAC business combination
transaction of which we are aware where the sponsor would have
received no additional consideration in the form of fees, founder
stock, promotes or other benefits compared to other
shareholders. Had the transaction closed, the Pershing
Square Funds would have invested $1.6 billion in PSTH units on
precisely the same terms as every other investor who bought stock
in our IPO.
As the plaintiffs are certainly aware, the time required to
resolve the lawsuit and remove its overhang on the company will
increase the likelihood that the Sponsor and Director Warrants will
expire worthless. Rather than being “promised” $880 million in
“compensation,” the Sponsor and Directors have received no value,
and are at risk of experiencing a total loss. This fact is not lost
on the litigants, and it is one of the pressure tactics that they
likely believe can be brought to bear to motivate us to settle the
litigation and enrich the lawyers involved at the expense of our
shareholders and warrant holders. Unfortunately for them, it won’t
work.
We will work diligently to make rapid progress on obtaining
approvals for SPARC so that we can return your cash, preserve the
value of our outstanding shareholder warrants, and give you a free
option to invest in our next transaction in a better structured
vehicle. That would be our greatest pleasure.
We have got your six.
Sincerely,
William A. Ackman
Important Additional Information and Where to Find It
This press release does not constitute an offer to sell or buy or
the solicitation of an offer to buy or sell any securities. This
communication is not a recommendation to buy, sell or exchange any
securities, and it is neither an offer to purchase nor a
solicitation of an offer to sell securities. Information about PSTH
and certain of the matters discussed in this press release is
available at the SEC’s website at www.sec.gov.
Forward-Looking Statements This press release contains
certain forward-looking statements within the meaning of the
federal securities laws. These forward-looking statements generally
are identified by the words "believe," "project," "expect,"
"anticipate," "estimate," "intend," "strategy," "future,"
"opportunity," "plan," "may," "should," "will," "would," "will be,"
"will continue," "will likely result," and similar expressions.
Forward-looking statements are predictions, projections and other
statements about future events that are based on current
expectations and assumptions and, as a result, are subject to risks
and uncertainties. Many factors could cause actual future events to
differ materially from the forward looking statements in this
release. You should carefully consider these and the other risks
and uncertainties described in PSTH’s annual report on Form 10-K
and other documents PSTH has filed with the SEC. Those filings
identify and address other important risks and uncertainties that
could cause actual events and results to differ materially from
those contained in the forward-looking statements. Forward-looking
statements speak only as of the date they are made. Readers are
cautioned not to put undue reliance on forward-looking statements,
and PSTH assumes no obligation and does not intend to update or
revise these forward-looking statements, whether as a result of new
information, future events, or otherwise. PSTH does not give any
assurance that PSTH will achieve its expectations. The inclusion of
any statement in this press release does not constitute an
admission by PSTH or any other person that the events or
circumstances described in such statement are material.
About Pershing Square Tontine Holdings, Ltd. Pershing
Square Tontine Holdings, Ltd., a Delaware corporation, is a blank
check company formed for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with a private company. PSTH is
sponsored by Pershing Square TH Sponsor, LLC (the “Sponsor”), an
affiliate of Pershing Square Capital Management, L.P., a registered
investment advisor with approximately $14 billion of assets under
management. www.PSTontine.com
About Pershing Square Holdings, Ltd. Pershing Square
Holdings, Ltd. (LN:PSH) (LN:PSHD) (NA:PSH) is an investment holding
company structured as a closed-ended fund.
Category: (PSH:Investments)
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version on businesswire.com: https://www.businesswire.com/news/home/20210819005826/en/
Media Camarco Ed Gascoigne-Pees / Julia Tilley +44
(0)20 3781 8339, media-pershingsquareholdings@camarco.co.uk
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