Pershing Square USA Eyes $10B IPO, Plots Quick Investments

Photo Credit: Pershing Square’s Bill Ackman, Senate Democrats / CC by 2.0

As Universal Music’s board considers Pershing Square’s unsolicited $64 billion takeover proposal, two Pershing entities are moving forward with plans to launch an up to $10 billion combined IPO.

We first highlighted those plans earlier this week, when Pershing unveiled the IPO (which technically consists of two offerings) in SEC filings and a presentation from founder Bill Ackman.

But since then, with Ackman and other Pershing higher-ups discussing their plans in interviews, a bit more information has surfaced.

Assuming it goes off without a hitch, the process would see both Pershing Square USA (PS USA) and Pershing Square Inc. (PSI) land on the New York Stock Exchange. The former would act as a closed-end investment company, with Pershing Square Capital Management (PSCM) in place as its investment manager.

(PSCM is also the investment manager behind different Pershing operations – including the London Stock Exchange-listed Pershing Square Holdings. As laid out in the prospectus, it’d collect a 2% asset-value-based management fee from PS USA, which could eventually be followed by similar companies that provide payments to the manager.)

Pershing Square Inc., for its part, would serve as PSCM’s parent. Meanwhile, with PS USA shares priced at $50 a pop, IPO investors will receive one of the distinct PSI shares for every five PS USA shares purchased, according to the prospectus.

Additionally, institutional backers such as family offices and pension funds have already committed a cumulative $2.8 billion to a private placement, per Pershing.

Should the IPO wrap – the Pershing Square Tontine Holdings SPAC, some will recall, previously dissolved without finalizing a merger – what would Pershing USA’s model look like?

The prospectus describes plans to take “large minority stakes in 12 to 15 high-quality, predominantly North American-listed, large-capitalization growth companies at attractive valuations.” (The stakes could be heavily concentrated in a handful of companies within this portfolio as well.)

Though the term “activist investor” doesn’t appear in the document, the text does spell out that Pershing would target underperforming and undervalued assets with an eye on enabling “it to be a significant and influential shareholder.”

Perhaps most notably of all, the multibillion-dollar Pershing USA tranche would be deployed sooner rather than later, with the capital “largely fully invested in a matter of weeks,” in Ackman’s own words.

Time will tell precisely what this strategy looks like in practice – and how the IPO factors into the UMG takeover talks. But in general, it goes without saying that raising as much as $10 billion is a big deal, especially against the backdrop of the offer for the major label.

Speaking of that offer, UMG’s board has yet to issue a formal response (aside from an initial acknowledgment). However, the music conglomerate is aggressively buying back its shares, the price of which has rebounded by about 32%, to €20.41 (currently $24.05) apiece at present, since sinking to a record low late last month.