Pershing Square Tontine Holdings CEO Bill Ackman issued a letter to shareholders dated Agu. 19, addressing concerns about the lawsuit filed against his SPAC, which after a $4 billion IPO last year is the largest blank-check company yet created:
“Dear Pershing Square Tontine Holdings, Ltd. Shareholder,
A purported shareholder filed a lawsuit on August 17th claiming that PSTH has been operating as an illegal investment company because, among other claims, PSTH invested its IPO proceeds in securities (short-term Treasurys and money market funds that own short-term Treasurys). This is of course something all SPACs do as they preserve funds necessary to complete their initial business combinations. As the law professors who brought the case should very well know (as both are securities law experts), holding cash and government securities while seeking a business combination does not make PSTH an illegal investment company, nor does it make any of the hundreds of other SPACs that do the same, illegal investment companies either.
While we believe the lawsuit is meritless, the nature of the suit and our legal system make it unlikely that it can be resolved in the short term. Even if the case were dismissed expeditiously, the plaintiff can then appeal. As a result, the mere existence of the litigation may deter potential merger partners from working with PSTH on a transaction until the lawsuit is finally resolved.
Because the basic issues raised here apply to every SPAC, a successful claim would imply that every SPAC may also be an illegal investment company. As a result, the lawsuit may have a chilling effect on the ability of other SPACs to consummate merger transactions or to engage in IPOs until the litigation is resolved in PSTH’s favor, as the consequences of being deemed an illegal investment company are extremely onerous.
PSTH has about 11 months remaining to enter into a letter of intent with a transaction counterparty for its initial business combination, and six additional months to close that transaction. This period may be extended by up to six months by a vote of PSTH shareholders. While we have been working diligently to identify and close a transaction, and we have begun discussions with potential merger candidates, our ability to complete a transaction in the required time frame has been impaired by the lawsuit.
All is not lost, however. As we have previously disclosed, we have been working on obtaining approval for the launch of Pershing Square SPARC Holdings, Ltd. (“SPARC”). If we are successful in securing SPARC’s approval, and I am confident that we will get it done, we will have a clear path to mitigate the harm that this litigation has and will continue to cause to PSTH shareholders and warrant holders.” Read more.
