Bill Ackman aims for $2 billion in Pershing Square IPO, scaling back from initial $25 billion target

Billionaire hedge fund manager Bill Ackman’s new venture, Pershing Square USA, is setting its sights on raising up to $2 billion in its upcoming initial public offering (IPO). 

This marks a significant reduction from the fund’s original $25 billion target, which would have positioned it as one of the largest IPOs in history. 

The revised target reflects a more modest but still substantial offering, underscoring a strategic shift due to the closed-end fund’s unique structure, which traditionally garners less investor enthusiasm.

Originally, Ackman envisioned Pershing Square USA as a game-changer in the IPO landscape, with projections of raising up to $25 billion. 

However, recognizing the challenges associated with the fund’s closed-end structure, which limits investor liquidity, Ackman recalibrated his expectations. 

The new plan involves selling up to 40 million shares at $50 each, with the anticipated total raise now between $2.5 billion and $4 billion. 

While this adjustment brings the IPO back to a more manageable scale, it remains one of the year’s most notable offerings.

Investor interest and concerns

The New York Stock Exchange announced a delay in the fund’s debut, though reasons for this postponement were not specified. 

Despite this, interest from prominent investors remains strong. 

Notable entities such as Baupost Group, Putnam, and the Teachers Retirement System of Texas have already placed substantial orders for the IPO, reflecting confidence in Ackman’s reputation and the fund’s potential.

In his letter to shareholders, Ackman acknowledged the sensitivity surrounding the IPO’s size and expressed cautious optimism about the revised target.

Fund structure and focus 

The closed-end fund structure, while supporting long-term investment strategies, limits liquidity as investors can only exit by selling their stakes to others. 

This aspect of the fund has generated some investor concerns, particularly regarding the speed of capital deployment and the management of investments.

Since its inception, Pershing Square Holdings, Ackman’s decade-old fund providing permanent capital, has delivered a 6.4% return. 

Over the past 20 years, Ackman’s hedge fund has achieved an average annual return of 16.5%, outperforming the S&P 500 by 9.3 percentage points per year. 

Had Pershing Square USA existed in its current form, it would have returned 19.4% annually, with a 31% return over the past 6.5 years, according to Ackman’s promotional materials.

Pershing Square USA plans to concentrate investments in 12 to 15 large-cap, investment-grade, cash-flow-positive companies in North America. 

This strategy aligns with Ackman’s established approach of making high-stakes, concentrated investments. The fund aims to list on the New York Stock Exchange under the ticker symbol “PSUS.”

Ackman’s public persona and influence, particularly through social media platform X (formerly Twitter), have bolstered his efforts to attract retail investors. 

His recent high-profile campaign against Harvard University over various issues demonstrated his willingness to leverage his platform for broader impact. 

However, despite his extensive reach and the fund’s strategic merits, concerns about the closed-end structure and investment approach persist among potential investors. 

As the IPO moves forward, Ackman’s ability to address these concerns will be crucial in determining its ultimate success.

The post Bill Ackman aims for $2 billion in Pershing Square IPO, scaling back from initial $25 billion target appeared first on Invezz