Bill Ackman's High-Stakes IPO: A Revised Target Amid Waning Investor Sentiments

In a surprising turn of events, billionaire hedge fund manager Bill Ackman's highly anticipated investment fund has failed to garner the expected market enthusiasm. Ackman, known for his strong social media presence and bold political views, had previously aimed to raise at least $25 billion for a new closed-end investment fund, Pershing Square USA (PSUS), slated to be listed on the Nasdaq Stock Exchange. 

However, despite vigorous attempts to increase popularity among retail investors through interviews and social media posts, the fund appears to fall short of expectations. Given the softer-than-expected demand, Ackman has revised his original target to $10 billion, marking a 60% downgrade from the initial goal. 

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Scaling Back Ambitions

Initially setting a lofty whisper "anchor" of $25 billion, Ackman has now recalibrated his expectations to $10 billion—a figure that, while lower, would still set a record for this type of investment vehicle. The CEO of Pershing Square Capital Management expects total funds raised to range between $2.5 billion and $4 billion, capped at $10 billion. 

"The $25 billion number in the media initially anchored investors in thinking the deal would be too large," Ackman stated. "Ultimately, I expect this ‘anchoring' to be helpful to the final outcome."

Notably, the Harvard alum has invested a significant amount in this venture, selling 10% of his stake in Pershing Square Capital Management to finance the fund. Ackman made a personal investment of $500 million in Pershing Square USA to persuade cautious investors. He addressed the unique structure of the closed-end fund by drawing a parallel to Warren Buffett's Berkshire Hathaway, aiming to allay any investor doubts.

He has also convinced several institutional investors to bid on his fund, with prominent hedge fund Baupost Group, led by Seth Klarman, placing an order for $150 million. The Teachers Retirement System of Texas has invested $60 million in the fund, promising an increase if the raised funds increase. Meanwhile, mutual funds issuer Putnam Investments has placed an order of $40 million. Furthermore, an undisclosed family office has pledged to buy a 9.9% stake in this fund, as revealed in Ackman's letter. 

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Overcoming Market Skepticism

While the fundraising process has been underwhelming at best, it marks a pivotal moment in Ackman’s decadelong recovery journey. Pershing Square Capital Management has an impressive track record, delivering 36 times the returns over the past 20 years compared to the S&P 500's seven times returns.

While the Pershing Square USA fund is expected to gain at least 20% of its total assets from retail investors, Ackman is shifting strategy given the underwhelming market reception. In his letter, he requested strategic investors to bid to bolster total assets. 

"While we did not make it a requirement for strategic investors to invest in PSUS, our hope was that our strategic investors would find the offering highly attractive and participate in the IPO," Ackman wrote. "In short, this is a moment when you can be very helpful to Pershing Square by participating in the PSUS offering and giving your order to the banks. The sooner, the better. An order today will enable us to improve the strength of tomorrow's initial message to the market on deal size. Orders that come later are of course still very helpful as the book will build and we create momentum over the weekend into Monday."

Cautious Outlook

Ackman had previously emphasized the fund’s distinct advantages: low fees, liquidity, the brand’s reputation, and a diverse global investor base. However, Pershing Square USA filed a letter with the SEC on July 25, seemingly urging investors to exercise caution before investing in the fund. 

The letter stated, "You should not consider the statements in the communication attached as Appendix A in making your investment decision. The Company specifically disclaims the statements made by Mr. Ackman. You should make an investment decision only after carefully evaluating the information in the preliminary prospectus contained in the Registration Statement and the final prospectus to be subsequently filed with the SEC." 

Because of the letter and the SEC's investigation, it will be at least a few more days until we learn the final pricing for the new IPO or get an official launch date. 

You Don't Need To Wait For Ackman To Make Money

Bill Ackman is far from the only game in town when it comes to making money in the current market. Private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For example, the Jeff Bezos-backed investment platform just launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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