Bill Ackman’s SPAC Calls Investor Claim That It’s Illegal ‘Fictional’
(Bloomberg) -- Bill Ackman’s Pershing Square Tontine Holdings Ltd. called investor claims that it’s operating illegally not just implausible, but “fictional,” and repeated a request that the shareholder’s lawsuit be thrown out.
Shareholder George Assad sued the blank-check company in August, less than a month after it abandoned plans for a deal with Universal Music Group, claiming it’s not a Special Purpose Acquisition Company, but an investment company and should be regulated as one.
“He hypothesizes a legal regime in which there are only two possibilities: a company can be an operating company, or it can be an investment company,” Ackman said in a court filing Monday. “Acquisition companies, a well-established legal structure of which SPACs are one part, apparently no longer exist.”
The lawsuit could have wide-ranging implications for the financial industry if a court determines that SPACs more generally should be regarded as investment companies subject to the 1940 Investment Company Act, which requires registration with the Securities Exchange Commission and places restrictions on fees charged for investment advice.
PSTH is the world’s biggest SPAC, having sold 200 million IPO units for $20 each, valuing it at $4 billion. Assad claims that for 2 1/2 years the company held only Treasuries and cash equivalents, so it has to be treated as an investment company -- a notion Ackman rejects in the latest filing.
“It is absurd to claim that responsible cash management turns a SPAC into an investment company,” he said.
Ackman also says Assad didn’t own shares when PSTH established and disclosed its structure as a SPAC by July 2020 and his claims are barred by a one-year statute of limitations.
In a separate filing on Monday, a group of 62 shareholders of the SPAC holding more than $25 million of shares asked U.S. District Judge Analisa Torres to allow them to file a brief in support of the motion to throw out the case. The group said the suit “would upset two decades of market practice and individual shareholder expectations and likely kill the SPAC form, thereby further decreasing choices for individual investors.”
The case is Assad v. Pershing Square Tontine Holdings Ltd., 21-cv-06907, U.S. District Court, Southern District of New York (Manhattan).
©2021 Bloomberg L.P.