Billionaire investor Bill Ackman scraps launch of Pershing Square USA

Billionaire investor Bill Ackman scraps launch of Pershing Square USABillionaire investor Bill Ackman has officially scrapped the launch of Pershing Square USA, just days before the fund was set to debut on the New York Stock Exchange.

The decision comes on the heels of mounting challenges, including a significant backtrack on initial public offering (IPO) plans, as at least one high-profile investor withdrew their support and the fund faced renewed regulatory scrutiny.

On Wednesday, Ackman took to social media platform X, where he boasts 1.3 million followers, to announce the halt in plans, stating that his team had reassessed the structure of the fund. “We will report back once we are ready to launch a revised transaction,” he assured followers in a four-paragraph statement.

Hours later, Ackman revealed that he had made the final decision to withdraw the IPO earlier that morning after devising a better transaction structure. This move highlights the ongoing struggles of closed-end funds, which have seen a decline in popularity due to their tendency to trade at a discount to their underlying assets. In fact, no new closed-end funds were launched last year, and only six debuted in 2022, according to industry data.

Ackman first announced plans for the fund in February, aiming to create a more affordable investment vehicle that would replicate the strategies of his hedge fund, targeting U.S.-based investors, including retail customers. The initial ambition was to raise up to $25 billion in assets, potentially marking one of the largest IPOs in recent years and significantly expanding the $19 billion already managed by his New York-based Pershing Square Capital Management.

However, investor confidence faltered as concerns arose regarding the fund’s structure and timing of new capital investments amidst a surging market. By last week, Ackman informed his management company that the fund would be limited to $10 billion, and by Tuesday, he adjusted expectations to approximately $2 billion.

“While we have received enormous investor interest in PSUS (Pershing Square USA), one principal question has remained: Would investors be better served waiting to invest in the aftermarket than in the IPO?” he wrote in his initial Wednesday post.

Despite engaging in numerous meetings with top hedge and mutual funds and generating considerable interest for this new investment vehicle—the first since raising $2.9 billion for Pershing Square Holdings a decade ago—Ackman acknowledged that the fund’s structure raised valid concerns. His firm had even committed $500 million as an anchor investment for the proposed U.S.-listed investment holding company.

Complicating matters further, last week, Ackman sent a letter to investors detailing the listing process and seeking additional funding commitments. However, the letter’s filing with regulators contributed to the delay in the anticipated trading start. Notably, the Boston-based hedge fund Baupost Group, led by renowned investor Seth Klarman, opted out of participation, leading to a ripple effect of uncertainty among other potential investors.