Enrique Abeyta’s Take on PSTH Dropping UMG Deal

Enrique Abeyta’s Take on PSTH Dropping UMG Deal

Whitney Tilson’s email to investors discussing Enrique Abeyta’s take on Pershing Square Tontine Holdings Ltd (NYSE:PSTH).

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PSTH's Deal With UMG Is A No Go

Here's an excerpt from the update my colleague Enrique Abeyta sent to his Empire SPAC Investor subscribers yesterday on Bill Ackman's Pershing Square Tontine Holdings (PSTH):

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InvestElectron Capital Partners returned 10.3% net for August, pushing its year-to-date returns into the green at 10%. The MSCI ACWI was down 3.9% for August, bringing its year-to-date return to -18.8%, while the S&P 500 was down 4.2% for August, which brought its year-to-date return to -17%. The MSCI World Utilities Index lost 1.8% for Read More

Today's announcement that Pershing Square Tontine Holdings can no longer consummate its transaction with Universal Music Group ("UMG") has to be a disappointment for Bill Ackman – but less so for shareholders.

Ackman had come up with a "super clever" structure that could meet the needs of Vivendi (VIV.PA), the seller of UMG. (You can refer back to our special report on the deal right here.)

Unfortunately, the U.S. Securities and Exchange Commission ("SEC") decided the transaction was too complicated for it. So, it blocked the deal.

Ackman will still be investing in UMG. But he will be using his Pershing Square funds rather than the PSTH vehicle.

So, what does this mean for shareholders? It might actually be a good thing! We absolutely love the music business and think the transaction would have worked out great in the end. But in the near term, the stock market was taking a different view, and the stock had been under pressure. With special purpose acquisition companies ("SPACs"), in general, having been sold off savagely, it's hard to know how much of this was specific to the transaction...

Remember that Ackman always wanted to do more deals after the current one. Being active in negotiations, he's not starting from scratch and still has an enormous war chest. And even though the SEC stopped his plans, he bent over backwards to accommodate UMG, and he still came through with the deal. This is huge for prospective sellers because it shows Ackman is a man of his word...

Ackman looks even better as a prospective partner, still sitting on a massive pile of cash.

Empire SPAC Investor subscribers can read the full update here. If you aren't a subscriber, you can find out how to gain instant access to the update – and the rest of Enrique's research on PSTH – as well as the details on how to get 40% off the first year of a subscription to Empire SPAC Investor by clicking here.

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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