Solid Power is an early stage solid state electrolyte technology company. This type of transaction is representative of last week’s Decarbonization Plus III (DCRC) / Solid Power deal. The incentive structure is aligned to enrich sponsors for the vast majority of SPAC transactions. This was due in part to the apathy of the SPACs, as they traded in most cases under the value of trust. The Pershing Square Tontine (PSTH) business is tougher, but superior.The company’s sponsors have completely eliminated its founding shares, so there’s no way the sponsors can win without the rest of the shareholders. If the transaction is a disaster and the share price is below $12, the sponsors will lose their $17 million and all the work they’ve done will be worthless. Pershing Square Tontine (PSTH) 10% of UMG is in perfect harmony with the other shareholders. Like investors, sponsors’ income is proportional to the capital committed. This ensures that sponsors only win if other shareholders win.
Pershing Square Tontine Holdings: Not Your Usual SPAC Business
PSTH recently stated that its plan to buy shares was sold after the announcement and traded at only 10%. Investors devalue the UMG and do not value the option of being exposed to Ackman’s next two trades. PSTH shareholders who do not share will receive a refund of $20.
Shareholders will be redeemed for UMG and PSTH RemainCo shares and will also obtain Tontine bonus (2/9th of a guarantee per share) and will split subscription bonuses for shareholders who do not pay. The deal is valued at $1.5 billion, with 23% remaining in funds. With its extensive network of world-class musicians and a substantial record of recorded music, the Universal Music Group (UMG) has a strong gap. UMG generated 4 out of 5 of Spotify’s top artists in 2020.
Vivendi recently sold 20% of the company to a Tencent consortium (OTCPK: TCEHY). The company must list and distribute 60% of its shares to shareholders. Universal Music Group (UMG) could reach $49 billion or 23x its estimated 2021 EBITDA. By applying Morgan Stanley’s $49 billion value to UMG, Bill Ackman pays 19x 2021e. This is Warner Music Group’s lowest level since the IPO.
Analysts believe Ackman played it safe and was a wonderful choice. If he hadn’t found that bargain, he would have spent another year looking for that kind of investment. PSTH shareholders will be entitled to SPARC rights and possibly a continuing right to all future SPARCs. Investors will also purchase Tontine Warrants, which will likely be capped at a lower level. Bill Ackman has an excellent reputation as an investor and opportunistic deployment of wealth at the right time (eg the General Growth Properties business or its Covid hedge).
Pershing Square Tontine Holdings: Attractive Call Options
PSTH could surely (if not sooner) complete a good merger before the end of 2021 and earn substantial profits from SPAC stockholders. The SPAC boom is partly a result of a cash excess by the central bank and that the macroeconomic backdrop will not alter in the near future. We anticipate that such transactions predicated on revenues from 2023 or 2024 would not be easily agreed by shareholders.
Given the market dynamics of today, valuable SPACs (such as Bill Ackman) can be good long-term possibilities with a favorable risk-reward profile. The call options of PSTH have significantly lowered its subscription incentives. If a company merger is completed, the expiration term is five years after the agreement is completed. Following recent rigorous study, the appraisal of the SPACs was once again good. PSTH, operated as a value investor by Bill Ackman, is one of the few ‘must have’ brands which may really gain from today’s market environment. Compared to your warrants and ordinary shares, your calling options are lower and can provide a 3x transaction benefit.
Tontine Holdings, Ltd: What should you know about stocks?
Pershing Square Tontine Holdings, Ltd. (TSX:PSTH) is a publicly listed, property and liability insurance firm based in Montreal, Quebec and Canada. PSTH offers individual, business and group client property and casualty insurance. The sectors of the firm include property and casualty insurance and real estate.
The PSTH History
PSTH was established in 2006 and started to trade on the TSX, completing its initial public offer in 2009, on 27 June of the same year. In Quebec and Ontario the firm provides insurance through its numerous insurance subsidiaries and other group entities to retail and commercial clients. It operates as a prominent supplier of insurance in Canada for property and losses and has a diverse distribution strategy based largely on the size of each geographical market covered.
In the United States and the Canadian provinces of British Columbia, Manitoba, Ontario and Quebec, PSTH property and liability insurance products are offered predominantly. Property transactions involve land development, procurement and sales. PSTH is under competition from other property and victims, life insurance and brokers and agents.
Pershing Square Capital Management owns and controls the controlling stake of Pershing Square Holdings, Limited. Two other PSTH directors, Ron Ackman and Steve Fannon, also own substantial stakes in Ackman’s publicly traded pershing square hedge fund. Ackman is also CEO of Capital Management at Pershing Square. He holds 18,7% of PSTH and 34,5% of Pershing Square Holdings, but votes solely for his full shareholding in the publicly listed firm.
PSTH is an attractive stock at this level, especially for long-term investors. PSTH offers numerous advantages, including higher operational profit and higher investment dividend expansion, and is an attractive prospect for the property and accident insurance sector.