He Called a Market Bottom. Now This!
Bill Ackman wants to sell you 150 million shares in his new business for twenty bucks apiece to help him raise a grand total of three-billion-dollars. He promises to chip in a billion himself, all the money being invested straight into his new ‘blank check’ project.
A blank check company has no assets, no product, very few employees, nothing. It’s just a shell on the stock market, but the proceeds of its initial public offering (IPO) can be used to acquire a private company.
If a private company merges with a so-called shellco, it’s become publically traded via a backdoor method. Superinvestor Ackman wants to get involved so that he can own ‘mature unicorns,’ “numerous high-quality, venture-backed businesses” that aren’t listed, while his investors want the warrants, the rights to buy more future shares on the cheap.
You get a warrant when you pay your $20. If Ackman doesn’t find a “mature unicorn” that he can get approved, the warrants will expire worthless. If he harpoons a corporate whale, cash in the warrants. We’ll be talking more about how warrants work soon!
Bill Ackman’s name is well-known. He was involved in a high-profile TV brawl a few years ago with fellow billionaire Carl Icahn. It was a showdown of Herbalife stock sentiment, then in freefall. Icahn was long, Ackman was short; Icahn added to his billions, Ackman retracted.
The market kicked his behind then, but he’s returned the favor every year since judging by the track record of his hedge fund, Pershing Square Capital, and also through the pandemic. He listened to the warning signs in February and bought insurance contracts for doubtful debts, called credit default swaps. He made a fortune when the economy shut down, and those insurance contracts rocketed in value.
He then sold all his short positions on the 23rd of March, which, if you look at a graph of the S&P 500, you’ll see was the exact bottom.
There’s no way this wasn’t luck, but he still deserves applause. Ackman’s feel for the markets and rational thinking set him up to do well. The fact this guy is now getting involved in blank check companies is something we should all pay attention to, as these shellco’s are proliferating faster than we can count!