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Bill Ackman has postponed the initial public offering of his US investment fund Pershing Square USA, days after he acknowledged that it would raise far less money than initially planned and pleaded with investors to back the deal.
The postponement marked a startling setback for the billionaire hedge fund manager, one of the investing world’s most prominent figures, who previously expected to raise $25bn in what would have been one of the largest IPOs in history. It appeared to be related to comments made in an investor letter earlier this week that exceeded the scope of information submitted to regulators in the fund’s IPO filing, potentially violating regulations governing investor communications.
The letter alluded to possible trading activity in the shares after the IPO, as well as to the growing order book for the deal. Two people involved in the deal said banks leading the listing, a group that includes Citigroup, UBS, Bank of America and Jefferies, were waiting to see if it raised any red flags with US securities regulators.
A third person noted there was “an issue” with a document, alluding to the letter. The people added they expected the delay to take a number of days but that the company still planned on going public.
Pershing Square issued a statement late on Friday saying it was “proceeding with its initial public offering” and would announce pricing at a future date. A firm representative declined further comment in response to specific questions on the letter or potential regulatory issues.
Citi and BofA declined to comment. UBS and Jefferies did not immediately respond.
“We believe that the most important factor for creating long-term value for Pershing Square Inc is not the size of the PSUS IPO, but how it trades in the market,” Ackman wrote in the letter. “This transaction is therefore all about a successful IPO from the first day and successful trading at a premium thereafter.”
He added: “We believe that US retail will be huge source of after-market demand.”
The Securities and Exchange Commission limits how companies can market themselves ahead of their listing in an attempt to safeguard would-be investors. Businesses are also generally wary of providing forward- looking guidance that could open themselves up to liability.
The New York Stock Exchange posted a brief message on its website saying the IPO had been postponed, without adding further details.
Pershing Square USA, which plans to list under the ticker symbol PSUS, disclaimed Ackman’s comments in the regulatory filing that included the letter on Thursday.
Ackman had revised down the target size of the IPO from as much as $25bn in previous weeks to between $2.5bn and $4bn, according to the letter sent to investors in Pershing Square Holdings.
“This is a moment when you can be very helpful to Pershing Square by participating in the PSUS offering and giving your order to the banks, the sooner the better,” he said in the letter.
He also revealed that potential investors had expressed doubts that PSUS shares would trade at a premium to the net assets it manages, a crucial point in Ackman’s marketing push in recent weeks.
The company had planned to price its listing on Monday and shares were meant to begin trading the following day on the Big Board. The closed-end fund plans to invest in large companies that Ackman and his team believe are undervalued and have competitive advantages.
Additional reporting by James Fontanella-Khan, Amelia Pollard and Arash Massoudi