Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Pershing Square Tontine Holdings / Event-Driven

An "Everlasting Gobstopper" was a fictional candy from Roald Dahl's children's story Charlie and the Chocolate Factory. It was, according to Willie Wonka - owner of the factory and inventor of its confections - "for children with very little pocket money." The hard candy would change flavours and colours in one's mouth, but it would never shrink to nothingness. It would never disappear. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/211/405/original/Everlasting+Gobstopper+Gif1.gif?1622964485" class="editor-image img-responsive" data-smartkarma-image-id="211405"></figure></section><hr>Today 4 June 2021, at 2:30am E.S.T., <a href="https://www.smartkarma.com/entities/pershing-square-tontine-a" target="_blank" data-smartkarma-citation="entities:33390:1" rel="noopener">Pershing Square Tontine -A (PSTH US)</a> issued a <a href="https://pstontine.com/wp-content/uploads/2021/06/PSTH-Press-Release-6.4.2021.pdf" target="_blank" rel="noopener">Press Release</a> describing a complex series of transactions related to the pre-existing Pershing Square (Pershing Square Capital Management or "PSCM") SPAC vehicle (PSTH), <a href="https://www.smartkarma.com/entities/vivendi-sa" target="_blank" data-smartkarma-citation="entities:21076:1" rel="noopener">Vivendi SA (VIV FP)</a> and its unit Universal Music Group ("UMG") which is scheduled to IPO, and a group of follow-on assets.Pershing Square listed what was at the time the largest SPAC ever in July 2020 at US$20/share with a drop-dead dead (when PSTH needed to get a deal done) in late July 2022. The SPAC includes a 1/9th warrant with every share, and holders who hold all the way through the prospective business combination without redeeming were going to get a 2/9th warrant (which was called a Tontine Tarrant). In order to live up to their name, Tontine Warrant holders would also receive a pro-rata portion of the forsaken Tontine Warrants left over when some redeemed their SPAC shares. The SPAC also entered into a "Forward Purchase Agreement" with Pershing Square L.P. and Pershing Square International, and <a href="https://www.smartkarma.com/entities/pershing-square-holdings-ltd" target="_blank" data-smartkarma-citation="entities:967:1" rel="noopener">Pershing Square Holdings (PSH NA)</a> whereby the three parties would purchase US$1bn worth of SPAC shares (with one-third Sponsor Warrants attached) at a date no later than the business combination, and they had the option to purchase up to $2bn more of shares (plus 1/3 Sponsor Warrants). The strike price on the Common Shares for the Redeemable Warrants and Tontine Warrants is US$23.00/share. Sponsor Warrants are US$24.00/share (but longer maturity). The total available capital to contribute to such a combination would therefore be up to US$6.45bn. There was a clause allowing Pershing Square to put in more than $3bn if so mutually agreed. Given that PSTH is/was run by PSCM, "agreement" meant "if Bill Ackman wants to."There has been a lot of speculation on targets based on the initial idea of it being a "mature unicorn", with most observers concentrating on the word "unicorn" and not "mature" for the Tontine SPAC but Pershing Square head Bill Ackman has given hints in interviews (including <a href="https://youtu.be/sRH8F42yo04" target="_blank" rel="noopener">one video interview</a> with WSJ last month) and observer comments had been, as far as I could tell, way off base with people looking at companies to which Bill Ackman would likely be loathe to attach his name. The promise of Tontine Holdings was that it would be a large pot of capital which would "solve the seller's problem." It would also be "iconic" and the S-1 described the acquisition criteria (which effectively meant a bunch of the possible candidates bandied about were never really candidates):<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/211/174/original/Screenshot+2021-06-04+at+5.24.47+PM.png?1622798725" class="editor-image img-responsive" data-smartkarma-image-id="211174"></figure></section>Point #1 probably ruled out an internet growth company. Point #6 suggested it needed to be $15-20bn in market cap. Point #1 and Point#3-4 together suggested a mature cash-flow generative business which could grow. If Thomson Reuters had been for sale, one could have imagined that. There was speculation, quickly denied, that Bloomberg could be the target, but those businesses seem a bit disrupt-able. When I thought of "set-it-and-forget-it" businesses which needed to IPO, I thought of UMG, the Sony-EMI Music Publishing business, or a carveout food products business, because Bill Ackman loves his packaged food products. But I couldn't personally come up with one where I thought that Bill Ackman's structure could "solve a problem" which needed to be solved by Bill Ackman and not public markets. This is a complicated transaction. It seems unnecessarily complicated as so far described. While Bill Ackman is a consummate salesman - everything he has ever invested in as been good for the world if you listen to him - so one has to take what he says with a grain of salt. My first look at the structure suggests that some of the "complexity" involved as discussed in the WSJ interview is due to Bill Ackman solving for Bill Ackman's problems, not Bill Ackman solving for the Seller's Problems. Below the fold I break down the complexity, and the payoff structure for holders of PSTH and how that could work going forward.

An "Everlasting Gobstopper" was a fictional candy from Roald Dahl's children's story Charlie and the Chocolate Factory. It was, according to Willie Wonka - owner of the factory and inventor of its confections - "for children with very little pocket money." The hard candy would change flavours and colours in one's mouth, but it would never shrink to nothingness. It would never disappear. Today 4 June 2021, at 2:30am E.S.T., Pershing Square Tontine -A (PSTH US) issued a Press Release describing a complex series of transactions related to the pre-existing Pershing Square (Pershing Square Capital Management or "PSCM") SPAC vehicle (PSTH), Vivendi SA (VIV FP) and its unit Universal Music Group ("UMG") which is scheduled to IPO, and a group of follow-on assets.Pershing Square listed what was at the time the largest SPAC ever in July 2020 at US$20/share with a drop-dead dead (when PSTH needed to get a deal done) in late July 2022. The SPAC includes a 1/9th warrant with every share, and holders who hold all the way through the prospective business combination without redeeming were going to get a 2/9th warrant (which was called a Tontine Tarrant). In order to live up to their name, Tontine Warrant holders would also receive a pro-rata portion of the forsaken Tontine Warrants left over when some redeemed their SPAC shares. The SPAC also entered into a "Forward Purchase Agreement" with Pershing Square L.P. and Pershing Square International, and Pershing Square Holdings (PSH NA) whereby the three parties would purchase US$1bn worth of SPAC shares (with one-third Sponsor Warrants attached) at a date no later than the business combination, and they had the option to purchase up to $2bn more of shares (plus 1/3 Sponsor Warrants). The strike price on the Common Shares for the Redeemable Warrants and Tontine Warrants is US$23.00/share. Sponsor Warrants are US$24.00/share (but longer maturity). The total available capital to contribute to such a combination would therefore be up to US$6.45bn. There was a clause allowing Pershing Square to put in more than $3bn if so mutually agreed. Given that PSTH is/was run by PSCM, "agreement" meant "if Bill Ackman wants to."There has been a lot of speculation on targets based on the initial idea of it being a "mature unicorn", with most observers concentrating on the word "unicorn" and not "mature" for the Tontine SPAC but Pershing Square head Bill Ackman has given hints in interviews (including one video interview with WSJ last month) and observer comments had been, as far as I could tell, way off base with people looking at companies to which Bill Ackman would likely be loathe to attach his name. The promise of Tontine Holdings was that it would be a large pot of capital which would "solve the seller's problem." It would also be "iconic" and the S-1 described the acquisition criteria (which effectively meant a bunch of the possible candidates bandied about were never really candidates):Point #1 probably ruled out an internet growth company. Point #6 suggested it needed to be $15-20bn in market cap. Point #1 and Point#3-4 together suggested a mature cash-flow generative business which could grow. If Thomson Reuters had been for sale, one could have imagined that. There was speculation, quickly denied, that Bloomberg could be the target, but those businesses seem a bit disrupt-able. When I thought of "set-it-and-forget-it" businesses which needed to IPO, I thought of UMG, the Sony-EMI Music Publishing business, or a carveout food products business, because Bill Ackman loves his packaged food products. But I couldn't personally come up with one where I thought that Bill Ackman's structure could "solve a problem" which needed to be solved by Bill Ackman and not public markets. This is a complicated transaction. It seems unnecessarily complicated as so far described. While Bill Ackman is a consummate salesman - everything he has ever invested in as been good for the world if you listen to him - so one has to take what he says with a grain of salt. My first look at the structure suggests that some of the "complexity" involved as discussed in the WSJ interview is due to Bill Ackman solving for Bill Ackman's problems, not Bill Ackman solving for the Seller's Problems. Below the fold I break down the complexity, and the payoff structure for holders of PSTH and how that could work going forward. 

Pershing Square (PSTH) Turns a Tontine to an Everlasting Gobstopper

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

Headline Developments Nassim Taleb, the celebrated Black Swan author and mathematician, has published a paper trashing bitcoin.  In the paper (excerpts below), Taleb claims the theoretical value of bitcoin is zero, saying it is not a currency, can be neither a short or long term store of value, cannot operate as a reliable inflation hedge and, “worst of all”, does not constitute “not even remotely” a tail protection vehicle for catastrophic episodes (i.

Headline Developments Nassim Taleb, the celebrated Black Swan author and mathematician, has published a paper trashing bitcoin.  In the paper (excerpts below), Taleb claims the theoretical value of bitcoin is zero, saying it is not a currency, can be neither a short or long term store of value, cannot operate as a reliable inflation hedge and, “worst of all”, does not constitute “not even remotely” a tail protection vehicle for catastrophic episodes (i.

Independent Research, SPACs, SPAC Track

SPAC Track

Independent Research, SPACs

Equity Capital Markets

DD3 Acquisition Corp II / Equity Capital Markets

<ul><li>DD3 Acquisition Corp. II (DDMX)<a href="https://www.globenewswire.com/news-release/2021/11/19/2338254/0/en/DD3-Acquisition-Corp-II-Stockholders-Approve-Business-Combination-with-Codere-Online.html" target="_blank" rel="noopener">shareholders approve</a> the merger with Codere Online. Set to close on 11/30 followed by ticker change to CDRO.</li><li>Yunhong International (ZGYH) <a href="https://www.sec.gov/ix?doc=/Archives/edgar/data/1773086/000110465921142009/tm2133495d1_8k.htm" target="_blank" rel="noopener">will liquidate</a> as opposed to extending. It will dissolve and return $10.31 per public share.</li><li>SoFi Technologies, Inc. (SOFI)<a href="https://www.businesswire.com/news/home/20211119005721/en/SoFi-Technologies-Inc.-Announces-%C3%A2%C2%80%C2%9CRedemption-Fair-Market-Value%C3%A2%C2%80%C2%9D-in-Connection-With-Redemption-of-its-Outstanding-Warrants" target="_blank" rel="noopener">Announces “Redemption Fair Market Value”</a> in Connection With Redemption of its Outstanding Warrants</li></ul>

DD3 Acquisition Corp. II (DDMX)shareholders approve the merger with Codere Online. Set to close on 11/30 followed by ticker change to CDRO.Yunhong International (ZGYH) will liquidate as opposed to extending. It will dissolve and return $10.31 per public share.SoFi Technologies, Inc. (SOFI)Announces “Redemption Fair Market Value” in Connection With Redemption of its Outstanding Warrants

Alpha-Centric ESG Research

Kyle Rudden

Whether we call this a SPAC bubble that has burst or a SPAC bull-run "correcting" itself, one thing is clear – the global SPAC market is cooling off. Cooling off... but not dead. SPACs are likely to play a much larger role in global equity markets than they have historically, and Asia is poised to play a larger role within that larger global equity markets role. We are already seeing evidence of this.Specifically, the recent increase in SPAC-related interest and activity in Asia by: 1) SPAC sponsors (growing number of Asia-based sponsors and foreign SPACs seeking Asia-based targets), 2) Asia's unicorns (several have announced huge SPAC deals), and 3) Asia's financial exchanges (which are increasingly enabling local SPAC listings, such as Singapore Exchange's new framework).It is still too soon to call anything an Asia SPAC "boom," but the growth is tangible and immediate enough for optimism. It motivated me to finally write about a topic I have been meaning to cover – i.e., ESG issues related to the SPAC vehicle itself, as well as to how SPACs are applied in supporting sustainability-related tech startups (e.g., electric vehicles, batteries/storage, clean energy).

Whether we call this a SPAC bubble that has burst or a SPAC bull-run "correcting" itself, one thing is clear – the global SPAC market is cooling off. Cooling off... but not dead. SPACs are likely to play a much larger role in global equity markets than they have historically, and Asia is poised to play a larger role within that larger global equity markets role. We are already seeing evidence of this.Specifically, the recent increase in SPAC-related interest and activity in Asia by: 1) SPAC sponsors (growing number of Asia-based sponsors and foreign SPACs seeking Asia-based targets), 2) Asia's unicorns (several have announced huge SPAC deals), and 3) Asia's financial exchanges (which are increasingly enabling local SPAC listings, such as Singapore Exchange's new framework).It is still too soon to call anything an Asia SPAC "boom," but the growth is tangible and immediate enough for optimism. It motivated me to finally write about a topic I have been meaning to cover – i.e., ESG issues related to the SPAC vehicle itself, as well as to how SPACs are applied in supporting sustainability-related tech startups (e.g., electric vehicles, batteries/storage, clean energy).

SPACs and ESG: Issues Related to the SPAC Vehicle Itself and Sustainability Use Cases

President, Vision Research

Robert C Prather Jr

President

Vision Research

Vision Research was formed in 2004 with the vision of generating the best possible fundamental analysis and investment research for smid cap US equities. In 2008, we broadened our coverage to include mid/large cap US stocks.  After researching a  few ideas outside the US each year for a number of years, we launched a dedicated non-US equity product at the end of 2015.  This was followed by the introduction of a product focused on IPOs in mid-2017.

Fundamental Insight

Pershing Square Tontine Holdings / Equity Capital Markets

SPACs have been around for a long time but the market exploded in 2H20 and 1Q21.  This Original seeks to provide a lot of information surrounding US SPACs, including a SPAC's lifecycle, various entry points to invest, differences when compared to a traditional IPO, what areas of the market are attracting the most SPAC activity, and emerging structures and changes in the SPAC market.  While these equities are helping a lot of companies get public and lining the pockets of sponsors, SPACs have not historically been good investments.  Lots of investors claimed this time was different, but the last quarter or so may have begun to reveal the same cracks.

SPACs have been around for a long time but the market exploded in 2H20 and 1Q21.  This Original seeks to provide a lot of information surrounding US SPACs, including a SPAC's lifecycle, various entry points to invest, differences when compared to a traditional IPO, what areas of the market are attracting the most SPAC activity, and emerging structures and changes in the SPAC market.  While these equities are helping a lot of companies get public and lining the pockets of sponsors, SPACs have not historically been good investments.  Lots of investors claimed this time was different, but the last quarter or so may have begun to reveal the same cracks.

SPACs: Capitalize on Structure/Catalysts to Find Entry Points to Go Long but Longer Term, Go Short

United States

Pershing Square Tontine Holdings, Ltd. operates as a blank check company. The Company aims to acquire a business via a merger, capital stock exchange, asset acquisition, stock purchase, and reorganization.

Pershing Square Tontine Holdings (PSTH US)

Pershing Square Tontine Holdings (PSTH US)

Pershing Square (PSTH) Turns a Tontine to an Everlasting Gobstopper

Pershing Square Tontine Holdings is in talks to own 10% of Universal Music Group. The Transaction is complex, with future optionality for PSTH...

Travis Lundy

Weekly Innovation Review (WIRE) #37

Nassim Taleb, the celebrated Black Swan author and mathematician, has published a paper trashing bitcoin. In the paper, Taleb claims the...

Granite Bay Capital

A Rare Liquidation Appears.

DD3 Acquisition Corp. II (DDMX) shareholders approve the merger with Codere Online. Set to close on 11/30 followed by ticker change to CDRO.

SPAC Track

SPACs: Capitalize on Structure/Catalysts to Find Entry Points to Go Long but Longer Term, Go Short

Better understand the structure, lifecycle, investment timing, and emerging trends in the SPAC market that exist today to help you decide at what...

Robert C Prather Jr

Pershing Square (PSTH) Turns a Tontine to an Everlasting Gobstopper

Pershing Square Tontine Holdings is in talks to own 10% of Universal Music Group. The Transaction is complex, with future optionality for PSTH...

Travis Lundy

Weekly Innovation Review (WIRE) #37

Nassim Taleb, the celebrated Black Swan author and mathematician, has published a paper trashing bitcoin. In the paper, Taleb claims the...

Granite Bay Capital

A Rare Liquidation Appears.

DD3 Acquisition Corp. II (DDMX) shareholders approve the merger with Codere Online. Set to close on 11/30 followed by ticker change to CDRO.

SPAC Track

SPACs and ESG: Issues Related to the SPAC Vehicle Itself and Sustainability Use Cases

In Asia there is an undeniable upswell in SPAC activity – by SPAC sponsors, crown-jewel unicorns, and bourses like SGX. This covers ESG issues...

Kyle Rudden

SPACs: Capitalize on Structure/Catalysts to Find Entry Points to Go Long but Longer Term, Go Short

Better understand the structure, lifecycle, investment timing, and emerging trends in the SPAC market that exist today to help you decide at what...

Robert C Prather Jr