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Bill Ackman Cancels SPAC Plan for Universal Group Deal amid Regulatory Scrutiny

UTC by Bhushan Akolkar · 3 min read
Bill Ackman Cancels SPAC Plan for Universal Group Deal amid Regulatory Scrutiny
Photo: Depositphotos

The US SEC along with some investors raised concerns over the $4 billion investment in Universal Group via the SPAC – Pershing Square Tontine Holdings (PSTH). Ackman shall now fund this investment through his Pershing Square hedge fund.

Billionaire investor Bill Ackman has called off his plans of buying a stake in Universal Group through a special purpose acquisition company (SPAC). Instead, the investor will buy 10% of Vivendi’s Universal Music Group through his hedge fund.

Bill Ackman and His SPAC Plan

The recent decision comes amid objections coming from regulators and investors. The decision comes amid the 60% spin-off of the Universal Group to Vivendi shareholders. This decision of spin-off has also attracted investors from around the world. China’s Tencent has shown major interest in this deal.

The call by Ackman to buy the minority stake using the SPAC has raised concerns from the beginning. SPACs have been the hot trend on Wall Street recently. As the name suggests, the Special Purpose Acquisition Company has not commercial operations but only formed with the intent of raising capital through Initial Public Offering (IPO) or forming a merger or acquiring another company.

Over the last year, Wall Street and European markets have seen a sudden surge in such companies amid a heated IPO market.

The US SEC Plays Spoilsport

Bill Ackman’s SPAC – Pershing Square Tontine Holdings (PSTH) – released the statement blaming the U.S. Securities and Exchange Commission (SEC). The SPAC noted that the securities regulator had raised several issues with the deal without disclosing them. Speaking to CNBC, Ackman said:

“The SEC raised a deal killer. They said that, in their view, the transaction did not meet the New York Stock Exchange SPAC rules and what that meant was what I would call a dagger in the heart of the transaction”.

But this is not just about the regulators! Even some investors raised a query concerning the SPAC deal. The PSTH shares have tanked 18% since the announcement. The billionaire investor belies Universal to be an “incredibly iconic, super durable business”. With his investments, the company valuations stood at $41 billion.

“We underestimated the reaction that some of our shareholders would have to the transaction’s complexity and structure,” said Ackman. The SEC objection is also a major blow to the biggest-ever SPAC. Last summer, PSTH has raised a total of $4 billion in an Initial Public Offering (IPO). Now the SPAC has 18 more months to find another target, or it will have to return the funds to investors.

After the recent episode, the SEC has started probing several aspects of this investment vehicle. The regulator has cast doubts on the marketing aspects and the projected growth of these companies.

Now, that Ackman is conducting the $4 billion investment through its Pershing Square fund, analysts at Jefferies believe this could be a big outlay for the billionaire. However, it could be co-financed.

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