Renowned hedge fund manager Bill Ackman has withdrawn the initial public offering (IPO) of his new investment fund, Pershing Square USA, after many twists and turns in the tale. Ackman reduced the valuation of the fund drastically from $25 billion to $10 billion initially and then to $2 billion, and finally decided to withdraw the IPO application, only with the promise to be back soon.
First, a Little About Bill Ackman’s Fund
Pershing Square USA is a closed-end fund. Ackman touted the fund as a pathway for common investors to have access to hedge-fund type investing strategy. The fund was to go public on the New York Stock Exchange under the ticker symbol “PSUS,” with a focus on large-cap, undervalued companies. Additionally, Ackman hoped to become an anchor investor in some of the to-be-listed private companies, where he sees great value, using the capital offered by the closed-end structure of the fund.
Ackman even initiated a roadshow earlier this month to boost interest in the offering. However, the lackluster investor response forced Ackman to rethink his public listing decision. Reports even suggested that Ackman wanted to make Pershing Square USA a new-age Berkshire Hathaway (BRK.A) (BRK.B), holding massive annual general meetings and finding a place for the fund in the S&P 500 Index (SPX).
Here’s Why Ackman Withdrew the IPO Plans
During the initial phase, Ackman boasted that this IPO would be one of the largest for such companies in history, with a $25 billion valuation. However, the low interest in the offering and feedback from potential shareholders led to cutting the valuation drastically to $2 billion last week. After postponing the initial listing date to sometime towards the end of July, Ackman scrapped the idea of the IPO completely.
A common concern raised by investors was that, like other closed-end funds, PSUS shares would also trade at a discount to the net assets held in the fund after the IPO. According to industry statistics, only six closed-end funds went public in 2022 and zero in 2023. The initial investors (anchor investors) of PSUS’ listing included Boston-based hedge fund Baupost Group, which had committed $150 million, and Teacher Retirement System of Texas, which committed $60 million.
Unfortunately, it was Baupost Group’s withdrawal that dealt a blow to Ackman’s IPO ambitions. Soon after Ackman made public that Seth Klarman’s Baupost Group was backing PSUS, Klarman, who prefers to remain away from the public eye, decided to withdraw his commitment. It became tougher for Ackman to pitch the IPO to other potential investors after an anchor investor of this stature backed out from its commitment.
Why Is Bill Ackman so Famous?
Bill Ackman runs a very popular and profitable hedge fund, Pershing Square Capital Management LP, with $10.76 billion in assets under management (AUM). His portfolio is heavily focused on Consumer Cyclical stocks, followed by Communication Services. In the last twelve months, the fund has generated an average return of 12.26%. Of the 487 hedge fund managers ranked on TipRanks, Ackman ranks 47. He has a Sharpe ratio of 3.10 with an astounding portfolio gain of 194.9% since January 2016.
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