PSH.L - Pershing Square Holdings

[Gregmal]

I heard he also had an investment that went down 10% once.

[gfp]

yes, PAH went from $10-->$28-->$6-->$11. I can't find the great ackman slide presentation about compounders and Martin Franklin that came just before the fall.

 

he was also behind Justice and still owns 13% of QSR (burger king/popeyes)

 

Oh yeah - I forgot it was a SPAC called Justice before it bought Burger King.  I guess he's a SPAC expert by now

[thepupil]

Bill SPACkman, blower upper of funds (except the 2 flagship ones that made money/outperformed for most investors since 1993)

 

I’m a SPAC MAN!!!

[Gregmal]

Pre deal SPAC(especially if you can get IPO, which Bill certainly can) are probably the most underrated cash alternatives an investor can buy.

[fareastwarriors]

Martin Franklin is back again with another Billion $ spac.

 

What a SPAC-tacular time to raise money.

 

 

[Jurgis]

I’m a SPAC MAN!!!

 

This guy SPACs!  8)

[gfp]

Pre deal SPAC(especially if you can get IPO, which Bill certainly can) are probably the most underrated cash alternatives an investor can buy.

 

That is very true.  Lots of optionality - and literal options thrown in to boot.  Plus you get your cash back if they don't find a deal.  Sometimes I buy them below $10 - assuming 10 is offering price - afterwards, but they don't come with included warrants when you buy them after the fact

[TwoCitiesCapital]

Pre deal SPAC(especially if you can get IPO, which Bill certainly can) are probably the most underrated cash alternatives an investor can buy.

 

That is very true.  Lots of optionality - and literal options thrown in to boot.  Plus you get your cash back if they don't find a deal.  Sometimes I buy them below $10 - assuming 10 is offering price - afterwards, but they don't come with included warrants when you buy them after the fact

 

+1

 

Have only done it once, but I believe I made 6-7% holding a SPAC at below NAV waiting for a deal. Not a bad return on cash for the holding period.

[thowed]

the great ackman slide presentation about compounders and Martin Franklin that came just before the fall.

 

Is it this one?

 

Good point made about divorces.  This is the sort of hard-to-find scuttlebutt (if you're not in the right part of the industry) that can be invaluable, as it can shake up the performance of outstanding investors, especially the established Hedge guys.  See also: spending too much time on your a) art collection b) penthouse properties c) charity events etc. etc.

 

I would still love to believe in PSH at the current discount, but can't really see the appeal of a portfolio made so much of fast food chains and a hotel franchise chain.

 

The SPAC will be fascinating, but due to my cynicism makes me worry that he's got cocky again after March, and will blow it again.

Ira-Sohn-2015-Presentation.pdf

Ira-Sohn-2015-Presentation.pdf

[5xEBITDA]

Pre deal SPAC(especially if you can get IPO, which Bill certainly can) are probably the most underrated cash alternatives an investor can buy.

 

That is very true.  Lots of optionality - and literal options thrown in to boot.  Plus you get your cash back if they don't find a deal.  Sometimes I buy them below $10 - assuming 10 is offering price - afterwards, but they don't come with included warrants when you buy them after the fact

 

+1

 

Have only done it once, but I believe I made 6-7% holding a SPAC at below NAV waiting for a deal. Not a bad return on cash for the holding period.

 

It is worth monitoring to be opportunistic. In March, I was able to buy a large basket of various SPACs trading at 10-15%+ annualized yields to NAV and they've all repriced to 1-2% yields. It doesn't happen often, there was maybe a two week period to put the trade on.

[BG2008]

Pre deal SPAC(especially if you can get IPO, which Bill certainly can) are probably the most underrated cash alternatives an investor can buy.

 

That is very true.  Lots of optionality - and literal options thrown in to boot.  Plus you get your cash back if they don't find a deal.  Sometimes I buy them below $10 - assuming 10 is offering price - afterwards, but they don't come with included warrants when you buy them after the fact

 

+1

 

Have only done it once, but I believe I made 6-7% holding a SPAC at below NAV waiting for a deal. Not a bad return on cash for the holding period.

 

It is worth monitoring to be opportunistic. In March, I was able to buy a large basket of various SPACs trading at 10-15%+ annualized yields to NAV and they've all repriced to 1-2% yields. It doesn't happen often, there was maybe a two week period to put the trade on.

 

I thought about doing the same as it happened back in 2008/2009.  But the spreads were bigger back then.  Capital allocation towards new ideas have done much better thus far.  I made a conscious decision to diversify my positions and bought a basket of smaller companies that had 3-4x upside. 

[TwoCitiesCapital]

Pre deal SPAC(especially if you can get IPO, which Bill certainly can) are probably the most underrated cash alternatives an investor can buy.

 

That is very true.  Lots of optionality - and literal options thrown in to boot.  Plus you get your cash back if they don't find a deal.  Sometimes I buy them below $10 - assuming 10 is offering price - afterwards, but they don't come with included warrants when you buy them after the fact

 

+1

 

Have only done it once, but I believe I made 6-7% holding a SPAC at below NAV waiting for a deal. Not a bad return on cash for the holding period.

 

It is worth monitoring to be opportunistic. In March, I was able to buy a large basket of various SPACs trading at 10-15%+ annualized yields to NAV and they've all repriced to 1-2% yields. It doesn't happen often, there was maybe a two week period to put the trade on.

 

I thought about doing the same as it happened back in 2008/2009.  But the spreads were bigger back then.  Capital allocation towards new ideas have done much better thus far.  I made a conscious decision to diversify my positions and bought a basket of smaller companies that had 3-4x upside.

 

It's not being pitched as a replacement for long positioning. It's being pitched as a cash alternative.

 

If you want to go long something, go long something. If you want to hold money in CDs, money market, cash, shirt duration bonds, etc you can add SPACs under NAV to the list.

[5xEBITDA]

Pre deal SPAC(especially if you can get IPO, which Bill certainly can) are probably the most underrated cash alternatives an investor can buy.

 

That is very true.  Lots of optionality - and literal options thrown in to boot.  Plus you get your cash back if they don't find a deal.  Sometimes I buy them below $10 - assuming 10 is offering price - afterwards, but they don't come with included warrants when you buy them after the fact

 

+1

 

Have only done it once, but I believe I made 6-7% holding a SPAC at below NAV waiting for a deal. Not a bad return on cash for the holding period.

 

It is worth monitoring to be opportunistic. In March, I was able to buy a large basket of various SPACs trading at 10-15%+ annualized yields to NAV and they've all repriced to 1-2% yields. It doesn't happen often, there was maybe a two week period to put the trade on.

 

I thought about doing the same as it happened back in 2008/2009.  But the spreads were bigger back then.  Capital allocation towards new ideas have done much better thus far.  I made a conscious decision to diversify my positions and bought a basket of smaller companies that had 3-4x upside.

 

It's not being pitched as a replacement for long positioning. It's being pitched as a cash alternative.

 

If you want to go long something, go long something. If you want to hold money in CDs, money market, cash, shirt duration bonds, etc you can add SPACs under NAV to the list.

 

Agree. My basket was to replace / supplement allocations to called bonds & CP and other short duration credit used as a cash alternative.

[fareastwarriors]

Ackman Gears Up for Unicorn Hunt With $4 Billion Blank-Check IPO

 

Pershing-backed SPAC set to price Tuesday, trade Wednesday

Listings by blank-check companies are already at all-time high

 

https://www.bloomberg.com/news/articles/2020-07-21/ackman-gears-up-for-unicorn-hunt-with-4-billion-blank-check-ipo?srnd=premium

[thepupil]

Recent interview.

 

Ackman is 98% long, is short some high yield index but has no equity shorts, manages ~$11B (for contextualizing their $1B - potentially $3B in PSTH).

 

PSTH is up modestly so far; Mr. Market can only get so excited about a pile of cash.

 

Billionaire investor Bill Ackman told CNBC on Wednesday he’s bullish on the U.S. and markets over the long term, but companies with a high debt will have a hard time surviving as the country struggles to reopen fully.

 

“We are long-term bullish on America; We are long-term bullish on the markets,” Ackman said in a “Squawk Box” interview. “But I would say I’m cautious on markets over the next period of time. We have today a short position in a high-yield index. We are bearish on highly levered companies.”

 

“The highly levered businesses will struggle because it will take time for the economy to reopen,” he added. “I don’t think the Fed is going to bail out companies with too much debt.” Such companies carry a high level of debt to cash and therefore have a stronger likelihood of default or bankruptcy during a crisis.

 

Ackman is betting against high-yield companies at a time when the Federal Reserve is buying up recently downgraded “fallen angels,” companies that slipped from investment grade into junk due to the coronavirus pandemic.

 

The founder and CEO of Pershing Square Capital Management revealed he continued to own the same positions in Hilton, Restaurant Brands, Lowe’s and Starbucks. He added that his hedge fund is approximately “98% long.”

 

“We are not short any stocks. We are obviously bullish on America, owning restaurant companies, hotel companies, real estate development companies. These are a bet that the country will recover,” Ackman said.

 

Ackman turned heads on Wall Street earlier this year by pocketing more than $2 billion in bets against markets in March. The activist investor went on CNBC in mid-March to warn investors that “hell is coming” and urge the White House to shut down the country for a month. He later revealed his firm exited the short positions on March 23, just as the S&P 500 bottomed.

 

His dire comments later sparked controversy, with many saying his fund would profit from further market declines. His hedge fund managed $10.7 billion of assets as of June 9.

 

“I really blame CNBC,” Ackman said. “It took 15 seconds of my interview and then went around scaring people because it was good television. ... I gave a very bullish message. I said I was buying stocks.”

[thepupil]

nice august so far...34% discount to NAV at $25, close to all time wides (there was brief 40 ish% in the throes of March).

[thepupil]

https://assets.pershingsquareholdings.com/2020/08/28171601/Letter-to-Shareholders-Excerpted-from-the-2020-Semiannual-Financial-Statement.pdf

 

Bill Ackman at his absolute finest.

 

I am buying what this man is selling and regret having sold a share/trimmed.

 

What a freaking letter. Pound the table, Billy!

 

In all seriousness, probably will buy more.

 

It is conventional wisdom in the closed-ended fund investment community that strong performance, large buyback programs, the initiation of a quarterly dividend, and insider purchases by the manager should assist in reducing the discount to NAV at which a closed-ended fund trades.

Judged by this wisdom, we deserve high marks. Since our March 2018 annual letter, in fewer than two-and-one-half years, NAV per share has increased by 153%;6 PSH has repurchased 45.1 million shares representing 19.2% of shares outstanding; the company initiated a 10-cent quarterly dividend in the first quarter of 2019; and the Investment Manager and its affiliates have increased their beneficial ownership of PSH from 3.9% to 25.2%10 through open market purchases and share buybacks. Yet, in spite of all of the above, the discount has widened by approximately 1,000 basis points over the same period.

Whatever the explanation for today’s large discount, our strong preference is for the shares to trade at or above net asset value over the long term. The only consolation prize to the wide discount is that our share repurchases have provided us with an attractive incremental investment opportunity that has enhanced our returns to shareholders marginally in recent year

 

To increase the probability of our addition to the FTSE 100 index, at the end of this year, we will be converting all of PSH’s management shares to public shares, as management shares are not considered in the index inclusion calculation. This will add approximately 6 million public shares to our listed market capitalization. Had this conversion taken place previously, PSH would today be the 99th largest company in the index, and would only need to increase in market cap by 13.1%, all else remaining the same, in order to meet the FTSE 100 inclusion threshold.

PSH could today reach the necessary threshold if the current discount to NAV declined to 20%. This relatively modest reduction in discount could become self-fulfilling if investors: (1) expect that PSH will be added to the index in the short term, (2) believe that FTSE 100 inclusion will be a catalyst for a significant upward revaluation of the company, and (3) therefore buy PSH shares driving the discount narrower and our market cap above the relevant threshold.

 

 

 

In order to address these alignment issues, with PSTH we eliminated all forms of compensation, advisory fees, and founder shares. We further improved alignment issues by the Pershing Square funds committing to purchase a minimum of $1 billion of common stock and shareholder warrants on the same terms as PSTH’s public shareholders. In addition, the Pershing Square funds purchased so-called Sponsor Warrants for $65 million – their estimated fair market value at the time of the IPO – that will become 10-year warrants on 5.95% of the newly merged company shares, only if we successfully complete a transaction.

The Sponsor Warrants have a strike price 20% above PSTH’s IPO price, and are not transferable, salable or exercisable for

 

e first three years after the merger. The Sponsor Warrant’s valuation was determined in consultation with a nationally recognized valuation agent, which considered, among other factors, that if we did not complete a transaction by the 30-month term of the SPAC, the Sponsor Warrants would likely lose substantially all of their value.

We also negotiated and capped the underwriting fees payable at 1.8% of the SPAC’s minimum equity capital, further reducing frictional costs. We paid two-thirds of these fees with the purchase of the Sponsor Warrants, which reduces the total frictional costs of PSTH in a merger borne by shareholders and our merger partner to a de minimis amount.

We used the excess demand for the PSTH IPO to curate a shareholder list that would be the envy of any public company. We selected investors for their reputation as long-term, value-added owners. We expect our shareholder registry will contribute to PSTH’s appeal as a merger partner for a high-quality company.

 

 

 

The fact that PSTH trades at 106% of NAV is particularly notable when it is compared with the 33% discount to NAV (comprised of cash and marketable securities) at which PSH trades, as PSH is managed by the same investment team, owns 91% of the PSTH Sponsor Warrants, and is a minimum $1 billion forward purchaser, alongside the two Pershing Square private funds, of PSTH common stock and shareholder warrants, with the right to increase its forward purchase investment

a

While the Sponsor Warrants are valued at $84 million today,b in the event PSTH completes a successful merger, the Sponsor Warrants would be worth 1.5% to 2% of the equity market capitalization of the merged company at the time of completion of the merger (based on a Black Scholes valuation) depending on its stock price volatility. As PSTH is targeting a company with a post-merger market cap of $15 billion to as much as $30 billion or more, the Sponsor Warrants could become a material asset to PSH. This becomes even more likely if, as we expect, the merged company stock price increases above the initial transaction value, as the warrants, in that event, will become much more valuable.

At PSH’s current 33% discount to NAV, PSH shareholders are getting all of PSH’s $1.7 billion of net free cash, the Sponsor Warrants, the Forward Purchase commitment, the option to increase the Forward Purchase commitment, plus hundreds of millions of additional value for free. PSH’s undervaluation has enhanced the benefits of our ongoing buyback program that endeavors each day to purchase the maximum number of shares permitted under the buyback regulatory regime.

It is important to note that all of the economics of PSTH are going to PSH shareholders and our private fund investors. This is an unusual approach as nearly every other SPAC sponsor has chosen to keep all or substantially all of the founder economics of launching a SPAC for the individuals that control the sponsor, rather than for the other funds they manage on behalf of their investors.

As the largest invest

 

 

 

[Jurgis]

Keep spreading the gospel, brother!  8)

[5xEBITDA]

The only thing I might comment on is that I think it's slightly disingenuous to say "because PSTH trades above trust value the market thinks we'll find something good". PSTH common shares have embedded warrants that cannot be separated and shareholders only receive if they participate in whatever deal he finds, and this embedded warrant is different from the other warrants received by buying the PSTH unit. Like other SPACs, you can separate the regular warrants from the common share after a certain amount of time has passed, but with PSTH you cannot separate the additional warrant embedded within the common stock and you only get to keep that if you participate in the deal. So, and I haven't done the math to check this to specifically get the #s, but as long as the regular warrants of PSTH trade about $0 the common shares will incorporate their value in addition to the trust value...i.e., trading above trust on an absolute basis, but the equation is really premium / discount to NAV + embedded value of warrants to get there. No duh its gonna trade above super well because of the baked in warrant in the stock and its like free money to trade the unit around. 

 

Historically, super large SPACs ($500mn+) have not really traded as well as smaller SPACs because their size really limits the universe of stuff they can buy. I think PSTH will be successful in finding something cool because Ackman does have a very large network and still a pretty good reputation among executives in the industry.

[thepupil]

5xEBITDA, it’s quality posts like this that make you part of a shareholder list that would be the envy of any public company.

 

We used the excess demand for the PSTH IPO to curate a shareholder list that would be the envy of any public company. We selected investors for their reputation as long-term, value-added owners. We expect our shareholder registry will contribute to PSTH’s appeal as a merger partner for a high-quality company.

[5xEBITDA]

5xEBITDA, it’s quality posts like this that make you part of a shareholder list that would be the envy of any public company.

 

We used the excess demand for the PSTH IPO to curate a shareholder list that would be the envy of any public company. We selected investors for their reputation as long-term, value-added owners. We expect our shareholder registry will contribute to PSTH’s appeal as a merger partner for a high-quality company.

 

To be fair, I am more than happy to hang on to shares and participate in whatever deal he finds and looking forward to doing so. Changing market conditions require portfolio re-balancing.

[thepupil]

5xEBITDA, it’s quality posts like this that make you part of a shareholder list that would be the envy of any public company.

 

We used the excess demand for the PSTH IPO to curate a shareholder list that would be the envy of any public company. We selected investors for their reputation as long-term, value-added owners. We expect our shareholder registry will contribute to PSTH’s appeal as a merger partner for a high-quality company.

To be fair, I am more than happy to hang on to shares and participate in whatever deal he finds and looking forward to doing so. Changing market conditions require portfolio re-balancing.

 

i hope you know that I'm making fun of Bill SPACkman's over the top language, not you.

[thepupil]

I purchased some more PSH today, at a 95% premium to my lowest cost lot, which is a tough pill to swallow, but it’s about where it’s going, not where it’s been.

 

It is about a 5% position for pupil’s parents, the 2nd largest after Berkshire. This is after I trimmed some at lower prices a short while ago.I am more comfortable with the portfolio after earnings and progress on reopening and agree with most of Ackman’s arguments. Also have some excess cash from tech trims.

 

Maybe that’s just me drinking the kool-aid.

 

I think it’s pretty unusual to purchase a top performing fund at a 30% discount, ahead of a possible major index inclusion.

[thowed]

Thanks for the tip-off about the Interim letter.

 

Interesting stuff.  My anti-Ackman resolve may be slowly crumbling...!

[petec]

@pupil, can you weight your thesis/reason for holding between

1) the discount to NAV

2) your conviction in the current holdings

3) your conviction Ackman will make good decisions long term (10y) and outperform?

 

I’m interested, having got this one wrong over the years.