Ackman’s Pershing Square fund shares drop in hotly anticipated debut

By Svea Herbst-Bayliss and Utkarsh Shetti

April 29 (Reuters) – Billionaire investor Bill Ackman launched his new Pershing Square USA closed-end fund on the New York Stock Exchange on Wednesday, offering retail investors a stock-picking strategy traditionally limited to the super rich for as little as $50 a share.

The fund, Pershing Square USA, trades under the ticker symbol PSUS and opened at $42 a share. Ackman also listed his management firm Pershing Square, which trades under the ticker PS and opened at $24 a share.

Because investors who paid $50 for each share of PSUS at the initial public offering also received 0.2 share in PS, the combined value is closer to $46.80.

Ackman raised some $5 billion in new assets, with shares priced at the IPO at $50 apiece, in what Dealogic said is one of the 10 largest public offerings in the last decade. The offering increased Pershing Square’s assets by about 25% to roughly $25 billion.

Flanked by his wife, Neri Oxman, and chief investment officer, Ryan Israel, Ackman was greeted with roaring cheers on the exchange floor in Manhattan’s financial district at the start of trading on Wednesday.

Ackman said in an interview that the new fund will help “democratize investing” by allowing investors to access the double-digit returns his investments have delivered over the last two decades. Traditionally hedge funds were off-limits to anyone but the wealthiest investors who met regulatory requirements to show they could withstand the fund’s ups and eventual downs.

But he also acknowledged that trading for his new offerings could be volatile at first, reasoning some investors may want to cash in on his hedge fund company and quickly exit the closed-end fund. He offered free shares of Pershing Square Inc to anyone who buys Pershing Square USA at the IPO, an idea Ackman said his wife had to boost demand.

Listing on the NYSE is the only way for U.S. investors to tap into Ackman’s returns since his Pershing Square Holdings fund, a closed-end fund listed in London, can’t be marketed directly to U.S. investors.

Ackman has generated some 25% returns per annum over the last eight years, handily beating the average closed-end fund’s 7% return over that time, Ackman said.

“This is something people will want to own,” he told Reuters, describing how his ability to engage deeply with companies and hedge the fund’s risk coupled with tax efficiency should be attractive to investors. “This is not going to be your grandmother’s closed-end fund.”

For Ackman, Wednesday’s listing marks a vindication of sorts nearly two years after he first attempted to list the fund in New York but backed out at the last minute amid tepid interest.

Anchor investors who committed $2.8 billion of the total $5 billion raised and promised to keep their money put for six months will receive 1.5 Pershing Square shares for every five they buy in Pershing Square USA.

FROM ACTIVIST CAMPAIGNS TO SOCIAL MEDIA

Ackman, who built his fame and estimated $9 billion fortune through activist campaigns at companies including Canadian Pacific and Chipotle, ranks among Wall Street’s most closely watched investors. More recently he has taken to social media platform X, where he has 2.1 million followers, to weigh in on everything from the dangers of sugary drinks to presidential politics.

Two years ago he had expected that his fame on X would help raise cash for his new fund. But this time, he said that more than 80% of the investments came from institutions including family offices, pension funds, insurance companies and high-net-worth investors.

Now Ackman wants retail investors to share the spoils in a fund that will largely mimic his other stock-picking funds with bets on companies like Google parent Alphabet, Universal Music Group and Uber Technologies.

The listing comes as the IPO market recovers after heightened volatility driven by the Iran war and investor caution towards AI-exposed software companies.

SpaceX is preparing for what could be the largest initial public offering in history and could take space exploration from a speculative venture to a mainstream investment. 

IPO A TEST FOR CLOSED-END FUNDS

The listing is set to test investor appetite for closed-end funds that often trade at a discount to the assets they hold.

They cannot be redeemed and only change hands on the secondary market after allocation, leaving them vulnerable to sharp swings that can push prices adrift from their net asset value.

“I would expect decent demand, but the structure with shares of the managing company as a sweetener suggests that the closed-end fund alone may not be enough to secure the desired level of investor interest,” IPOX Research Associate Lukas Muehlbauer said.

(Reporting by Svea Herbst-Bayliss in New York and Utkarsh Shetti in Bengaluru; Editing by Dawn Kopecki, Arun Koyyur and Lisa Shumaker)