Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Bill Ackman has told potential investors in the US-based investment fund he is working to take public that his prolific social media presence will help the vehicle trade at a premium valuation.
The billionaire hedge fund manager is soliciting investments for a listed fund of up to $25bn called Pershing Square USA, which if successful, would make it one of the largest initial public offerings of all time, rivalling oil major Saudi Aramco and Chinese tech group Alibaba.
Ackman over the past year has gained hundreds of thousands of social media followers amid a flurry of criticism of President Joe Biden and his support of former president Donald Trump, whom he publicly endorsed on Saturday evening. Ackman has also led a vocal campaign against US university bosses he claims have tolerated antisemitism on campuses, often by relying on lengthy social media posts.
The closely followed investor had touted his more than 1mn followers on social media platform X in investor pitches, according to multiple people who have attended them. He compared the fund to companies that would trade at a valuation of a least two times the book value of its assets.
The fund will also plan to hold an in-person annual shareholder meeting for its investors, modelled on Berkshire Hathaway’s lengthy, widely attended annual gathering hosted by Warren Buffett. Ackman has told people he expected the event would draw thousands of investors.
Combined with his social media persona, Ackman has told investors he plans to use public platforms to talk up his investment strategies, including assets he selects for the portfolio, and to discuss large bets he may occasionally put on to protect against a severe plunge in financial markets.
“I have built a relatively large following on Twitter, or X, over time and used it to discuss a number of topics but, historically, for regulatory reasons, have not been able to discuss investment activity. I will be completely unrestricted in terms of my ability to update our shareholders about developments in the portfolio,” Ackman told shareholders in a public presentation appended to the IPO roadshow.
In addition to announcing new investments and Pershing Square’s thinking, Ackman said he expected to “talk about why we put in place a hedge on interest rates or commodity prices, or whatever the particularly Black Swan event we are concerned about”.
Pershing Square declined to comment.
The new fund will be structured as a management company listed on the New York Stock Exchange and will invest in large, publicly traded companies with competitive advantages that Ackman believes are undervalued. While the stock will be easily tradable, the fund will have a closed-end structure, meaning its assets cannot be redeemed, unlike a traditional mutual fund, allowing for a longer-term investing style.
Ackman’s focus on the valuation of the fund could be aimed at heading off concerns that its shares may trade at a discount to the underlying value of the investments, an issue that has dogged the group’s Amsterdam and London-listed fund, Pershing Square Holdings, for several years.
The discount at the European-listed trust has closed in recent months, with one person close to Ackman suggesting this was partly due to his elevated online presence over the past year.
Ackman referred to his social media following and heavy media coverage as “notoriety” in the presentation. “I have built up a large base of institutional and retail followers that follow our every move . . . Media interest is valuable in attracting investor interest and also in creating liquidity for our shareholders,” he said.
Pershing Square USA is registered as a so-called 40 Act fund, which carries fewer regulatory restrictions on communications than Pershing Square Holdings.
“The fund is just geared to retail,” said one investment manager who has spoken with Ackman. “He can have direct engagement in the US, that’s why he thinks it will trade up. He wasn’t allowed to tweet about his London-listed fund,” added the investor.
Ackman is also comparing the vehicle to an ordinary corporation and believes it could eventually be included in broad stock market indices. “This isn’t a closed-end fund, this is Bill Ackman Incorporated,” said the investor.
Ackman has also told prospective investors his fund will seek to buy toehold positions in some large companies going public, acting as an anchor shareholder in IPOs he deems a good opportunity.
The fund could be the anchor shareholder of a separate Pershing Square-backed vehicle that is searching for a privately held company to take public. Ackman mentioned payments giant Stripe and Elon Musk’s Starlink, X and SpaceX as companies that the Pershing Square-backed vehicle could eventually take public with an anchor order from his US fund, according to a person who has heard Ackman’s pitch.
Ackman has also emphasised the strong performance of his Pershing Square Holdings vehicle during the Covid-19 period, which delivered a return of 183.8 per cent over the past five years to June 30. Performance was worse before the pandemic, however, as bets including a large investment in Valeant Pharmaceuticals lost billions and caused most institutional investors to pull their cash from his hedge fund.
Ackman plans to price the IPO at $50 a share, with a premium 2 per cent management fee akin to many hedge funds, without an accompanying performance fee. Pershing Square Holdings, its European counterpart, charges a 16 per cent fee on investment gains.
“You’re getting Bill Ackman for free,” concluded one investor of Ackman’s pitch. “You are getting me in my prime.”
