Shares of Bill Ackman’s new $5 billion investment fund saw a boost after its IPO, following Ackman’s own financial commitment. He purchased significant shares in both the closed-end fund, Pershing Square USA Ltd., and his asset management company, Pershing Square Inc.
After a tough IPO launch that raised less than the hoped-for $10 billion, shares in Pershing Square Inc. climbed nearly 16% to $28, while Pershing Square USA gained 1.8% to reach $42.71. However, investors who bought in during the IPO still found themselves about 3% down when considering the stock divided between the two firms.
Ackman’s move to buy additional shares comes as he highlighted a previous trading discount. The closed-end fund’s shares were worth around $49 in cash per share but were trading lower in the market. In a social media post, Ackman argued for the shares’ potential to rise again. He noted that when he sold a 10% stake to strategic investors in 2024, shares were valued below where they stand now.
Craig Stephens, founder of Access IPOs, commented that the lack of scarcity in shares usually dampens investor excitement. When supply is abundant, the price doesn’t pop as much.
Ackman and his affiliates stepped up, adding $200 million to the placement, bringing the total size closer to $3 billion. This was a jump from the $100 million they initially committed. The banks involved in the offering earned fees totaling $45.3 million.
Ackman’s shift towards permanent capital follows some past challenges. His high-profile trades from 2015 to 2017 in companies like Valeant Pharmaceuticals struggled, leading to significant losses. Now, with closed-end funds, he can collect fees more reliably, as these funds reduce concerns about investors pulling out their money.
Jack Shannon from Morningstar noted the appeal of closed-end funds but also pointed out their trading discounts, which can affect fundraising. While they offer a stable fee income, raising additional capital becomes harder when shares are valued lower than their assets.
To garner investor interest, Pershing Square USA has eliminated performance fees and incentivized investment by offering free shares in Pershing Square Inc. for every five purchased in the fund. With the recent share price gains, investors are now nearly even.
Despite issuing warnings about potential lows in share prices, Pershing Square USA focuses on overcoming past limitations seen in its UK-listed counterpart, which trades at a significant discount. Current data shows a discount exceeding 30% for the European fund, indicating challenges in narrowing the gap.
Ackman and his Chief Investment Officer, Ryan Israel, plan to engage with investors directly on social media, offering a more personal approach to transparency.
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Bill Ackman, Pershing Square, Bloomberg, asset management company, management company, Jack Shannon
