Bill Ackman’s SPAC Is Preparing a Deal. Investors Can Play It Cheaply Through His Closed-End Fund.
Bill Ackman made news last week with the disclosure that his investment firm had bought a roughly 6% stake in Domino’s Pizza and that he was “cautiously optimistic” that his special-purpose acquisition company would reach a deal to merge with what he called “an iconic, phenomenal, great business.”
Investors can play alongside Ackman through his chief investment vehicle, Pershing Square Holdings (ticker: PSH. Netherlands), an overseas closed-end fund that continues to trade at a big discount to its asset value despite solid gains in 2021 and huge returns in 2019 and 2020.
A deal for Ackman’s SPAC could boost investor interest in the fund, which trades around $36 a share, or a 26% discount to its most recent weekly net asset value of $48.78 a share.
The fund has traded at a persistently wide discount to NAV in recent years even as a revived Ackman has produced outsize returns. The fund gained 70% last year after a 58% return in 2019. The fund’s net asset value was up 7.5% year-to-date through May 11.
The fund also trades on the “pink sheets” (PSHZF) and on the London Stock Exchange, where it was added to the FTSE 100 index last year. It accounts for about 90% of the funds run by Ackman’s Pershing Square Investment Management. Barron’s has written favorably on the fund, including an article in late 2020.
The fund, with net assets of nearly $10 billion, has a concentrated equity investment portfolio that includes Lowe’s (LOW), Hilton Worldwide Holdings (HLT), Chipotle Mexican Grill (CMG), Restaurant Brands International (QSR), Howard Hughes (HHC), and Domino’s (DPZ).
The fund also offers a play on Ackman’s SPAC, Pershing Square Tontine Holdings (PSTH), because it has the opportunity to invest roughly $1 billion or more in any deal reached by the SPAC. It’s also entitled to potentially valuable sponsor warrants on the newly merged company’s shares if Ackman finds a target.