PSTH - Pershing Square Tontine

[johnpane]

My broker lists two series of 19 March 21 options. One looks like most stock options and the other has "(PSTH W/S 11:5.0)" appended.

 

I realize this has something to do with the attached warrants but do not understand the notation. Can someone decrypt this for me?

 

Curiously, 18 Dec 20 also has this extra series, but 15 Jan 21, 18 Jun 21, and 17 Dec 21 do not.

 

Apparently, these are options for 100 shares of PSTH bundled with 11 warrants. 100/9=11.1111 but fractional warrants are not issued. I assume if someone transacts 9 of these options the number of warrants involved would be 100=900/9 and not 99=9*11.

 

But what does the :5.0 mean?

[thepupil]

okay, so how do i lose money here...

 

Buy 1 PSTH Common                  -25.66

Sell 1 PSTH  Dec 21 $40 Call      +$5.70

 

Your net outlay is $20 and you have 100% upside if Ackman identifies a good one. If you don't like the deal your $20 back and cover the call (if it's a bad deal the stock px will be lower. Theta also decreases the call price over time.

 

Seems like you at most have $2 / downside and $20

 

 

EDIT 2: Actually it looks like the reference options are only for PSTH. the key is to not confuse the PSTH series with the PSTH1 series

 

EDIT confirming that the deliverable is 100 shares and 11 warrants so if it goes to $40 you are long $100 worth $40 ($4000) and short 100 $40 calls, and short 11 warrants, which would each be worth $17, so hav IV of $187 / contract so you'd have outlayed $2000 for a package worth $3800, roughly. If it went to $100 then the 11 warrants would be worth $847, so you'd still be profitable, having made $2000 on the common and lost $847 on the warrant short, I think.

 

the warrants being part of the deliverable makes it more complex, thoguh this doesn't really affect the put option shorts in my view.

 

 

DATE: September 11, 2020

OPTION SYMBOL: PSTHU changes to PSTH1

STRIKE DIVISOR: 1

CONTRACTS MULTIPLIER: 1

NEW MULTIPLIER: 100 (e.g., a premium of 1.50 yields

$150;

a strike of 20 yields $2,000.00)

NEW DELIVERABLE PER CONTRACT:

1) 100 Pershing Square Tontine Holdings Ltd. (PSTH)

Class A

Common Shares

2) 11 PSTH Distributable Redeemable Warrants (PSTH

WS)

CUSIPS: PSTH: 71531R109 / PSTH WS: 71531R117

SETTLEMENT

ALLOCATION: PSTH: 95% / PSTH WS: 5%

PRICING

 

[bizaro86]

okay, so how do i lose money here...

 

Buy 1 PSTH Common                  -25.66

Sell 1 PSTH  Dec 21 $40 Call      +$5.70

 

Your net outlay is $20 and you have 100% upside if Ackman identifies a good one. If you don't like the deal your $20 back and cover the call (if it's a bad deal the stock px will be lower. Theta also decreases the call price over time.

 

Seems like you at most have $2 / downside and $20

 

The path to losing money in that scenario is:

 

Ackman finds a deal. The market likes the deal, shares trade up to $30 at the deal close in June (or whenever).

 

Then after close there is a big macro/market issue. (Covid mutation maybe, or just an old fashioned big recesssion). Since he bought a high beta unicorn, it trades down huge and settles at $10 or something.

 

I'm not saying that's likely (and I have covered calls/puts here for March 2021 expiry) but it isn't impossible.

 

I think its very likely that trade works out - but it isn't quite a no-downside, size at 50% of AUM surefire winner, imo.

[thepupil]

yea thanks, trying to think about the path dependency and that helps.

 

in general i think the super expensive warrants and calls are why the puts are so expensive (that whole put/call parity and options arb and stuff beyond my comprehension).

 

i'm starting to think just being short the puts isn't the real trade here.

 

EDIT: I changed my view and covered all my short put positions at a minor profit, sold the puts on other underlyings at a minor profit and bought PSTH Common sold Dec $40 call for $20.40. there is path dependency and there is risk, but I think this is good risk/reward.

[Gregmal]

Rumors here lately are Stripe, Bloomberg again, Chic Fil A, and possibly the Capitol Building...the tension is building. Oh my!

 

Still just short some puts. Otherwise, no position.

[ValueMaven]

The Tontine makes no sense to me at all.  It's literally trading at 50% above cash.  I'm sorry but all of the SPAC hype reminds me a lot of Sodom & Gomorrah

[MattR]

The Tontine makes no sense to me at all.  It's literally trading at 50% above cash.  I'm sorry but all of the SPAC hype reminds me a lot of Sodom & Gomorrah

 

Yes price it at a premium now. However if there are any SPACs that are good -  this is one of them. Bill Ackmans connections will probably make a great deal for him and his shareholders.

[bathtime]

Stratechery wrote this on Dec. 3:

 

"Speaking as an analyst, I would like nothing more than to see an S-1 from Stripe, but it sounds like it’s not coming anytime soon (and I can state with a high degree of confidence that Stripe will not be doing a SPAC with any of its rumored suitors); the company is reportedly raising more money, but is increasingly spending the money it raises on acquisitions and investments (one would certainly assume that the core payments business is not only profitable but also has a very attractive cash conversion cycle)."

[Gregmal]

Why wouldn't all you greedy pigs just rush over to SVFAU which is only a 20% premium to cash and actually has a dude running it who knows how to bag tech stocks? 50% is insane if you are looking at a spac as a cash alternative, and especially so when you consider that Bill will almost certainly buy a real business. If you are just playin da momo, then I tip the hat and wish you luck.

[MattR]

Stratechery wrote this on Dec. 3:

 

"Speaking as an analyst, I would like nothing more than to see an S-1 from Stripe, but it sounds like it’s not coming anytime soon (and I can state with a high degree of confidence that Stripe will not be doing a SPAC with any of its rumored suitors); the company is reportedly raising more money, but is increasingly spending the money it raises on acquisitions and investments (one would certainly assume that the core payments business is not only profitable but also has a very attractive cash conversion cycle)."

 

I guess it is Chic Fila or IN and Out Burger. With his connection of restaurant brand international

[fareastwarriors]

Stratechery wrote this on Dec. 3:

 

"Speaking as an analyst, I would like nothing more than to see an S-1 from Stripe, but it sounds like it’s not coming anytime soon (and I can state with a high degree of confidence that Stripe will not be doing a SPAC with any of its rumored suitors); the company is reportedly raising more money, but is increasingly spending the money it raises on acquisitions and investments (one would certainly assume that the core payments business is not only profitable but also has a very attractive cash conversion cycle)."

 

I guess it is Chic Fila or IN and Out Burger. With his connection of restaurant brand international

 

If Ackman can bag either of those names, just crown him king. Those are absolute gems.

[thepupil]

Ya if he got chick fil a, I’d immediately buy my $40 calls at a huge loss (but overall gain) and convert the position to #neversell and sell some other stuff to delever

 

Probably my favorite company. Best fast food. Best service / consistency. Pandemic has been insane for them; I went to one that had 3 lanes and was taking up a whole dead mall parking lot with a complex maze of lines. 50%+ EBITDA margins. Owner operator model and simple menu = amazing

 

I doubt the cathy’s ever sell.

 

And yes I know they’re kind of Jesus freaks. Doesn’t change a damn thing about the chicken and the service.

[fareastwarriors]

Now that Plaid is available again, it makes for a nice target.

[merkhet]

Ya if he got chick fil a, I’d immediately buy my $40 calls at a huge loss (but overall gain) and convert the position to #neversell and sell some other stuff to delever

 

Probably my favorite company. Best fast food. Best service / consistency. Pandemic has been insane for them; I went to one that had 3 lanes and was taking up a whole dead mall parking lot with a complex maze of lines. 50%+ EBITDA margins. Owner operator model and simple menu = amazing

 

I doubt the cathy’s ever sell.

 

And yes I know they’re kind of Jesus freaks. Doesn’t change a damn thing about the chicken and the service.

 

100%. I don't agree w/ their politics, but it's a damned good business.

[Arski]

Something I can't get my head around; Why would a company go public through a SPAC and not just an IPO? Is it just easier or are there more things behind it?

[MattR]

Something I can't get my head around; Why would a company go public through a SPAC and not just an IPO? Is it just easier or are there more things behind it?

 

Several reasons:

Going through an IPO is extremely complex and expensive including advertisement, legal costs and the underwriting. And then you are not sure how much money you can raise. With a SPAC the manager or team tries to find businesses. While they still get a hefty compensation it is much cheaper and the manager/team will take care of the advertisement. As a company you also get a fixed amount of money, so it can be planned better.

There are quite a few problems with SPACs that can be bad for investors, but for a company it is generally a great way to go public.

[thepupil]

yea thanks, trying to think about the path dependency and that helps.

 

in general i think the super expensive warrants and calls are why the puts are so expensive (that whole put/call parity and options arb and stuff beyond my comprehension).

 

i'm starting to think just being short the puts isn't the real trade here.

 

EDIT: I changed my view and covered all my short put positions at a minor profit, sold the puts on other underlyings at a minor profit and bought PSTH Common sold Dec $40 call for $20.40. there is path dependency and there is risk, but I think this is good risk/reward.

 

Just as an FYI, the PSTH December $40 covered call is now like $21.30 and getting attractive again. I went biggy size at $20.5 and took some off near $24 (making in a month what a robinhoodie makes in one minute).

 

Given the SPAC floor, small changes change up the risk reward. I have enough of it, but would probably add in the $20.00 range.

[matthew2129]

Anyone know why PSCM's latest holdings shows a $4B investment in PSTH? Did they upsize their originally planned investment in PSTH or is this somehow showing the entire PSTH trust value (as opposed to PSCM's share, which was originally supposed to be $1-3B)?

 

https://whalewisdom.com/filer/pershing-square-capital-management-l-p#tabholdings_tab_link

 

Or do does the 200M share count somehow reflect PSCM's max 150M shares and also includes the embedded 50M of warrants?

[thepupil]

Rather than do the work myself, I note that 9/10 people on Twitter think this is a big deal and 1/10 say they’ve read the filing and it is not news.

 

I’m with the “not news” guy. This isn’t how they’d announce a megadeal. Bill would give us a big ass deck and some fireworks, CNBC, press release, etc.

[gfp]

Nothing new -

https://www.sec.gov/Archives/edgar/data/1336528/000119312521041777/d105691dsc13g.htm

 

"There has been no change in the voting power or ownership of the Reporting Persons since the Issuer’s initial public offering on July 24, 2020."

[invest0r]

yea thanks, trying to think about the path dependency and that helps.

 

in general i think the super expensive warrants and calls are why the puts are so expensive (that whole put/call parity and options arb and stuff beyond my comprehension).

 

i'm starting to think just being short the puts isn't the real trade here.

 

EDIT: I changed my view and covered all my short put positions at a minor profit, sold the puts on other underlyings at a minor profit and bought PSTH Common sold Dec $40 call for $20.40. there is path dependency and there is risk, but I think this is good risk/reward.

 

Just as an FYI, the PSTH December $40 covered call is now like $21.30 and getting attractive again. I went biggy size at $20.5 and took some off near $24 (making in a month what a robinhoodie makes in one minute).

 

Given the SPAC floor, small changes change up the risk reward. I have enough of it, but would probably add in the $20.00 range.

 

 

Have you looked at rolling your gains into the warrant arb? Spreads here have widen as the call prices have fallen.

 

Shares at $30 and come with 2/9 of a warrant. Warrants at $16.3 with $23 strike.

 

Cash outlay of $13.7... to make $9.3 on ITM warrants (and with slight upside exposure).

 

Risk is that the spread widens or it's a terrible deal. If there is a deal, the spread will close (likely) due to forced exercise.

 

No deal, you're still in great shape (compared to CC strategy), as the breakeven is at $13.7 instead of $20-21.

 

[matthew2129]

Ackman just tweeted that PSTH shareholders would be given first preference to buy into PSTH II (which was formed in DE in January) at the IPO price (presumably $20/share), rather than having to buy in secondary when it launches...

 

 

 

Curious to see how this would work if true, potentially valuable perk....

[TwoCitiesCapital]

Ackman just tweeted that PSTH shareholders would be given first preference to buy into PSTH II (which was formed in DE in January) at the IPO price (presumably $20/share), rather than having to buy in secondary when it launches...

 

 

 

Curious to see how this would work if true, potentially valuable perk....

 

You gotta hand it to him - he treats people fairly. Love the structure of the first one and love that he's doing this for the second.

[bizaro86]

I wonder how the actual mechanics of that would work. Would they distribute rights to PSTH holders and then they can exercise them for PSTH II units or something? I agree this is potentially a very valuable perk, but I don't want to assign it any value if it won't be available to me. (Canadian, retail)

[matthew2129]

I wonder how the actual mechanics of that would work. Would they distribute rights to PSTH holders and then they can exercise them for PSTH II units or something? I agree this is potentially a very valuable perk, but I don't want to assign it any value if it won't be available to me. (Canadian, retail)

 

Would think it should be easy enough to distribute PSTH II subscription agreements to shareholders in the same means you distribute annual shareholder proxy cards, but will interesting to see exactly how it's implemented. PSTH was marketed directly to Canadians so it shouldn't make a difference if you're in Canada.