And why Pershing Square Tontine Holdings stock could still be a buy despite it
Carlson Capital's Black Diamond Arbitrage Partners fund added 1.3% net fees in the first quarter of 2021, according to a copy of the firm's March 2021 investor update, which ValueWalk has been able to review. Q1 2021 hedge fund letters, conferences and more At the end of the quarter, merger arbitrage investments represented 89% of Read More
It’s been a long time since I’ve written about an investment surrounded with so much crazy intrigue as Pershing Square Tontine Holdings (NYSE:PSTH). If you’re thinking about buying PSTH stock, it helps to know some of the big, weird backstory.
And boy, is it weird. Let’s start with, “What in God’s name is a tontine?” I had to look it up, and the definition creeped me out. Dating to the 17th century, a tontine is a group annuity that’s basically a death bet. As shareholders kiss the dirt, the survivors split up the spoils. If you’re the last to die, you get all the shares. Yowza. Never outside of the Seventh Circle of Hell has betting on death been so lucrative. Too bad your friends can’t drink to your victory.
Good thing Pershing Square isn’t actually a tontine, but a special purpose acquisition company, or SPAC. The name must be (I hope) a cheeky, fiendish jape from its founder, rockstar investor Bill Ackman. As for the big story unfolding, it remains wrapped in SPACulation and mystery. No one knows exactly why Ackman’s raising the money. To buy something. But what? He hasn’t identified his target company yet.
Then came the Elon Musk tweet on Mar. 1. Two words, an ampersand and an acronym. Suddenly, investors are going crazy wanting to know more. I’ll do my best to elucidate here.
PSTH Stock and the Maybe-Musk Connection
So what did the Bad Boy of Tesla (NASDAQ:TSLA) say anyway? Ready to empty your bank accounts and buy every last share of PSTH stock? Here it is … wait for it … “Green eggs & SPAC.”
Excellent! If this is solid investment advice, then who needs Warren Buffett darkening their doorway?
This kind of nonsense should make Dr. Seuss roll over in his grave, claw his way out and punch Musk with his moldy skeletal fist as thanks for the B-grade pun. And yet, investment heavies have taken this as a sign. Some say it’s a fond wink at Ackman. Or a hint that a private Musk endeavor like SpaceX is his intended target. Or an invitation to court SpaceX as said target.
Now it’s my turn to theorize. I trained in college to be a literary critic, so I’ll point out that the dominant refrain in the Seuss book, repeated seven times by my count, is “I do not like green eggs and ham.” Do. Not. Like. So does Musk feel disdain for SPACs in general? While Wall Street continues its rabbit-hole guessing game, we might as well dub Seuss’s unnamed antagonist Dr. Tontine and call it good.
I think you get my pointed point. Some connect-the-dots games are pointless. We know Musk enjoys smoking pot. Maybe that’s it.
Pershing Square Tontine by the Numbers
After trying to decode all that Twitter (NYSE:TWTR) nonsense, I say it’s time for some nice, hard numbers. As is typical for SPACs, PSTH stock is doing well: up 12% over its six-month existence. When Ackman announced Pershing Square Tontine last June, it was the largest-ever blank-check company on record. And yet, 2021 has seen its gains flatten. At a certain point, secretive SPACs must give up some details. Why not now?
Smart investors want to know what Ackman’s funding. He may boast more investing acumen in his hangnail than I do in my entire brain. But this much I contend: PSTH stock won’t enjoy the major price jolt of other SPACs until prospective shareholders can connect it to an end game. Maybe Ackman is happy where things stand now. The market capitalization of Pershing is closing in on $5 billion.
And to be fair, Ackman has announced that he’ll reveal more. But get this: It’ll be through Twitter. Really. A Feb. 26 press release says as much. It notes that Pershing Square “may provide information to the public via the Twitter account of its Chairman and CEO.” Maybe it’s time for Musk to tweet, “Ackman hears a Who.”
Betting on Ackman
Given how things work on social media, Ackman could make a major announcement at just about any time. It sure sounds that way, right? Or at least those holding PSTH stock would hope so. In the meantime, what we have to go on is Ackman himself, and he’s no Wall Street slouch. His net worth surpasses $2 billion. He has not one but two Harvard degrees, including an MBA. He tried to buy Rockefeller Center before his 30th birthday.
But Ackman is also grandiose, controversial and even a bit odd. It’s hard to imagine spending $50 million on a public relations campaign to rail against a stock. But that’s what he did with Herbalife Nutrition (NYSE:HLF), supposedly because fellow billionaire, nemesis and onetime business partner Carl Icahn was buying shares with a vengeance. Ackman went short on HLF. It was a locking of horns for the history books.
Going at it on CNBC’s “Fast Money Halftime” in 2013, Icahn called “this Ackman guy” — and in anti-Semetic terms, mind you — a liar and “the crybaby in the schoolyard.” As for Ackman, he held his own and calmly dished a few insults himself. He called Icahn “a bully” who “takes advantage of little people.” I suggest you watch the video to get a taste of whom you’re entrusting with your PSTH stock dollars. At any rate, it’s a priceless slice of billionaire investor brawling.
To expand on Wall Street parlance, money talks so loud that it drowns out an investment legend’s eccentricities. Certainly we’re seeing some curious cat-and-mouse on display with this SPAC. But with shares under $30, PSTH stock is attractively priced. So long as Bill Ackman picks a viable company for his reverse merger, we’re bound to see some strong upward motion.
In fact, I’m so confident about this I don’t even feel the need to tweet about it. But if you must have a clue for you investor parlor game, here it is:
“The SPAC in the hat.”
On the date of publication, Lou Carlozo held a long position in TSLA.
More From InvestorPlace
The post A Look Into the Bizarre Backstory of Pershing Square Tontine Holdings appeared first on InvestorPlace.
A Look Into the Bizarre Backstory of Pershing Square Tontine Holdings
Fri, 05 Mar 2021 11:31:37 -0500 ipmlc-1869323