Reportedly, Ackman has been working on a potential transaction since November
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The last time I weighed in on Pershing Square Tontine (NYSE:PSTH), I said, “The best thing to do here is take a small position in the SPAC and wait. When a potential deal is announced, excitement could drive this stock higher. Be patient with this one.”
That was around Feb. 8, as the PSTH stock traded at $30.14. Since then, the SPAC stock has done a whole lot of nothing, last trading around $25 a share.
However, Don’t Count Pershing Square Tontine Out Just Yet
For one, as Bill Ackman said in late March, “Eight months since PSTH’s launch, we remain convinced that an investment in PSTH will generate highly attractive long-term returns, even from PSTH’s current stock price,” as quoted by Reuters.
Two, the SPAC may be nearing a deal, with Ackman reportedly working on a potential transaction since November. In fact, he has said, “We’re either going to get a transaction done in the next relative short term—weeks—or we’ll be onto the next one,” as quoted by The Wall Street Journal’s Cara Lombardo.
We also know Ackman has been looking for a “mature unicorn,” as noted by Advisor Perspectives’ Robert Huebsher. In addition, the target company reportedly meets Pershing’s acquisition criteria, as noted by a Seeking Alpha contributor.
For Ackman, those criteria include:
- “Simple, predictable, and free-cash-flow-generative.
- Formidable barriers to entry.
- Limited exposure to extrinsic factors that we cannot control.
- Strong balance sheet.
- Minimal capital markets dependency.
- Large capitalization.
- Attractive valuation.
- Exceptional management and governance.”
With hopes a deal may be imminent, I’d start accumulating shares of PSTH now. Anticipation of a deal, and news of an actual deal could drive the Pershing Square Tontine stock higher.
SPAC Returns Have Been Hot
We’re also hoping Pershing Square Tontine could be as hot as other SPAC stocks.
As I noted on Feb. 8, “Look at CIIG Merger Corp. for example. In November, CIIC was a $19 stock. A month later, it was up to $37.18 per share. One of its targets is U.K.-based Arrival, an electric bus and van maker that CIIC recently took public.”
Or look at Northern Genesis Acquisition Corp. On the announcement of its now-closed merger with Lion Electric Co. (NYSE:LEV), the SPAC stock exploded from about $10 to $34. We’re hoping the same could happen for Pershing Square Tontine, once a deal is announced.
Ackman Also Announced Pershing Square Tontine Holdings II
Once a deal closes with Pershing Square Tontine, Ackman has also mentioned there would be a Pershing Square Tontine II investment opportunity.
“We like the idea of providing investors who backed us in PSTH with the opportunity to invest in PSTH2 without paying a premium to its cash-in-trust value. We have always believed in giving existing investors the right to participate in new Pershing Square opportunities, and we intend to continue this tradition with PSTH,” as noted in PSTH’s 2020 Annual Report.
The Bottom Line on Pershing Square Tontine Stock
Granted, investors have grown impatient for Pershing Square Tontine to announce a deal.
However, there are hopes that could soon change, with Ackman reportedly working on a potential transaction since November. “We’re either going to get a transaction done in the next relative short term—weeks—or we’ll be onto the next one,” he said, as quoted by The Wall Street Journal’s Cara Lombardo.
With hopes for a deal, I’d start accumulating PSTH at recent lows. Anticipation of a deal, and news of an actual deal could drive the Pershing Square Tontine stock higher. From a current price of $24.84, I’d like to see the PTSH stock challenge $34.10 again.
Article By Ian Cooper, InvestorPlace
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.
