8 Key Takeaways From The PSTH SPAC Analyst Day, With Universal Music Group Merger Details

Bill Ackman hosted an analyst day Wednesday for his Pershing Square Tontine Holdings PSTH SPAC. Here is a look at some of the new and updated details from the company’s merger and remaining company.

The event included more than 100 slides, over three hours of content and a Q&A session.

Ackman On The SPAC Deal's Complex Structure: Ackman did his best to answer questions on the complex structure of the SPAC merger.

“We are willing to accept a high degree of situational, legal and/or capital structure complexity in a business combination if we believe that the potential for reward justifies this additional complexity, particularly if these issues can be resolved in connection with and as a result of a combination with us,” PSTH said in its 2020 prospectus.

The transaction was broken down in several slides. The total distribution will be determined by the share redemptions and warrant exchanges. The current rate is .643, which means an investor would receive 64 UMG shares for each 100 PSTH shares owned.

Fractional UMG shares will be paid in cash.

“As people understand this transaction, I believe it will trade at even higher premiums than ever before,” Ackman said.

Ackman On Music Monetization: Universal Music Group was highlighted during the analyst day, as expected. Ackman said music is following a path similar to software-as-a-service, suggesting a future music-as-as-service model.

Music subscription plans come with lower costs than streaming platforms like Netflix Inc NFLX.

Universal Music had 32% market share versus 16% for rival Warner Music Group WMG, and Universal had almost double the revenue Warner notched in 2020.

Ackman On Music NFTs: Investors were likely pleased to hear non-fungible tokens mentioned during the presentation. Music could be the ideal art form for NFTs, according to Ackman, who said they could transform the music industry.

Ackman On US Listing For UMG: One piece of new information shared Wednesday was the possibility of Universal Music Group being listed in the U.S.

“I have spoken to the NYSE and they would absolutely love to have UMG on their exchange,” Ackman said. The UMG board would have to choose to pursue this route, but Ackman made clear the NYSE was open to it.

Ackman On A UMG Dividend: Universal Music Group could pay a dividend, Ackman told investors. It's up to the board, but Ackman said he expects it to occur. 

Related Link: Bill Ackman SPAC Announces Universal Music Deal: Could Investors See A #1 Hit?

Ackman Wanted Larger Stake: Universal Music Group will be 10% owned by PSTH shareholders.

“The only negative of this transaction is that we couldn’t buy more,” Ackman said. “We were looking at as much as 17% but ultimately landed on 10% for various tax and legal reasons."

Ackman suggested that PSTH could own more of Universal Music Group down the road.

UMG will be 42% owned by current Vivendi VIVHY shareholders, 20% by Tencent Holdings TCEHY, 18% by Ballore Group, 10% by Vivendi and 10% by PSTH shareholders.

Ackman On RemainCo Timeline: After the UMG deal closes, the RemainCo will have $1.5 billion for completing additional deal.

“RemainCo will have a much larger market for opportunities,”

Ackman said they have held discussions and reengaged with a possible partner for the RemainCo.

“I feel the burden of the opportunity cost of our investors.”

Ackman suggested he will stay quiet on a potential merger partner for the RemainCo until the transaction with Universal Music Group is finalized. Ackman said the RemainCo deal will be a more traditional merger.

SPARC: The timeline on the SPARC is 10 years, much larger than the normal two-year timeframe to complete a SPAC merger.

“We actually think the longer the timeline, the quicker we get a deal done,” Ackman said.

The SPARC will look at companies that include mature unicorns, family owned companies, distressed companies, corporate carve outs or companies owned by private equity, he said. 

PSTH Price Action: Shares of PSTH ended Wednesday's session 3.2% lower at $22.97.