![]() It is counter to everything I understand about basic economics.” See Also: Bill Ackman Explains Why Inflation, Not Fed Rate Hike, Is Biggest Threat To US EconomyĪckman’s Criticism: The hedge fund manager said he is “puzzled to understand how the Fed believes that we are already at neutral. One’s cost of borrowing is a function of the interest rate and While 2.25 to 2.25% may be a neutral rate with 2% inflation, it is an extremely accommodative rate with inflation at 9%. The problem is that we are not close to a neutral rate. ![]() While 2.25 to 2.25% may be a neutral rate with 2% inflation, it is an extremely accommodative rate with inflation at 9%,” Ackman said. “The bond and stock market have rallied substantially since as the implication is that rates need not increase much more. Once he liquidates his SPAC and returns the capital to shareholders, he plans to distribute free SPARC rights to them instead.Billionaire hedge fund manager and Pershing Square Capital PSHZF CEO Bill Ackman explained through a series of tweets that a 2% borrowing rate is not neutral when inflation is trending around 9%. Rather than issuing shares at $10 or $20 a pop to raise a pot of money that is invested in Treasuries while the sponsor hunts for a target, he plans to distribute the right to buy shares at $20 once a deal is announced. This is like a SPAC, but without the pot of capital. In June he filed a registration for a new gambit: a “ SPARC”, or special-purpose acquisition rights company. He announced that he plans to dissolve his SPAC and return the capital raised. SPACs have just two years to find a merger target and, Mr Ackman wrote, “the mere existence of the litigation may deter potential merger partners”. But it may have spelled game over for his SPAC regardless. Writing to investors on August 19th, Mr Ackman argued that the lawsuit was “meritless”. The SEC has treated SPACs as distinct from investment funds for decades. Whether the lawsuit will succeed is unclear. Given the resulting onerous disclosure requirements and fee caps, this could kill SPACs altogether. If successful the suit would probably require SPACs to be registered as investment funds. But the argument could apply to SPACs in general: all hold their assets in Treasuries from their inception until they consummate a merger. Mr Ackman’s SPAC is a particularly good target for this complaint, even though its bid to buy shares in Universal Music Group eventually failed. The claim is that the only activities the SPAC has ever undertaken are investing in securities and equities, namely Treasuries and the attempt to buy shares in the process of being listed-the terrain of investment funds. On August 17th George Assad, a shareholder in the SPAC, sued it, alleging that it was actually an investment fund, which must be registered with the SEC and abide by all kinds of rules. The Securities and Exchange Commission ( SEC), America’s markets regulator, objected to the deal, leading Mr Ackman to write to investors on July 19th that he would no longer pursue it. This was an unusual use of SPAC capital: it would spend only some of the vehicle’s funds, and planned to buy shares in a firm that was already going public. ![]() After months of searching Mr Ackman tried to strike a deal in June to buy shares in Universal Media Group, a subsidiary being carved out of Vivendi, a listed entertainment conglomerate based in Paris. They typically take a minority stake in a private firm, so a big fund must limit itself to the tiny pool of such firms worth tens of billions of dollars. For most Wall Street endeavours the more capital the better, but for SPACs too much cash can complicate matters. But he has been pursued by a bevy of ghosts.įirst came Pinky and Inky, the obstructors. In July last year Mr Ackman raised $4bn for Pershing Square Tontine Holdings, making it by far the biggest SPAC created. It raises capital from investors that is held in a listed vehicle while it seeks a merger target. The goal of a SPAC is to gobble up a private company and take it public. ![]() Bill Ackman, a hedge-fund tycoon turned sponsor of a “special-purpose acquisition company” ( SPAC), has become a financial Pac-Man of sorts.
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