Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Ackman says SPAC does not need to be registered, pushes back on lawsuit

Published 08/17/2021, 10:37 AM
Updated 08/17/2021, 05:30 PM
© Reuters. FILE PHOTO: Bill Ackman, CEO of Pershing Square Capital, speaks at the Wall Street Journal Digital Conference in Laguna Beach, California, U.S., October 17, 2017. REUTERS/Mike Blake

© Reuters. FILE PHOTO: Bill Ackman, CEO of Pershing Square Capital, speaks at the Wall Street Journal Digital Conference in Laguna Beach, California, U.S., October 17, 2017. REUTERS/Mike Blake

By Svea Herbst-Bayliss

BOSTON (Reuters) -Billionaire hedge fund manager William Ackman said on Tuesday his blank-check acquisition company is not an investment firm that needs to register with U.S. regulators, pushing back against a lawsuit that alleges that his Pershing Square Tontine Holdings has improperly invested in securities.

"PSTH has never held investment securities that would require it to be registered under the Act, and does not intend to do so in the future," Ackman said in a statement, referring to the Investment Company Act of 1940 and the Investment Advisers Act of 1940, longstanding market regulatory laws.

"We believe this litigation is totally without merit," Ackman, who runs hedge fund firm Pershing Square Capital Management, added.

The lawsuit contends that Ackman's special purpose acquisition company (SPAC) - the largest ever formed - has acted like an investment company rather than a SPAC that is exempt from the registration requirement.

"The SPAC is a natural extension of Pershing Square’s investment fund management business. Pershing Square operates the SPAC like an investment fund and causes it to invest in securities like an investment fund. Today’s lawsuit argues that it should be regulated like an investment fund as well," said John Morley, a professor at Yale Law School who is one of a handful of lawyers working on the case.

The lawsuit, filed on Tuesday in U.S. federal court in New York by George Assad, an investor in the SPAC, states: "Investing in securities is basically the only thing that PSTH has ever done."

SPACs are meant to merge with private companies and then take them public.

The Securities and Exchange Commission is taking a closer look at potential abuses within blank-check companies as these vehicles have become extremely popular. SPACs launched by Wall Street financiers as well as celebrities have raised more than $100 billion.

Ackman's SPAC initially announced a plan that his SPAC would buy 10% of Universal Music Group at a time when it already was being taken public by Vivendi (OTC:VIVHY). Ackman scrapped the plan in July, saying that his hedge funds would now be making the investment amid growing concerns among regulators that the deal would not meet New York Stock Exchange rules.

He initially planned for his SPAC to distribute the Universal Music Group shares to its investors after its listing in Amsterdam next month.

The lawsuit will position Ackman against Robert Jackson, a law professor and former SEC Commissioner who will be arguing the case along with Morley. The two have long focused their scholarly research on investor protection and are working on the case together with law firm Bernstein Litowitz Berger & Grossman, among others.

© Reuters. FILE PHOTO: Bill Ackman, CEO of Pershing Square Capital, speaks at the Wall Street Journal Digital Conference in Laguna Beach, California, U.S., October 17, 2017. REUTERS/Mike Blake

The lawsuit also takes issue with fees which should be clear to outsiders. "The Defendants have received securities that under any plausible estimate are worth hundreds of millions of dollars — an unreasonable payment for the work performed," the suit said.

Ackman said that his SPAC like all others has owned U.S. Treasuries and money market funds.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.