Bill Ackman eyes IPO of Pershing Square

Bill Ackman is planning to take his investment firm public as soon as next year, the boldest move yet by the hedge-fund manager to capitalize on his social-media fame.

As a precursor to a public listing, Ackman is selling a stake in the firm, Pershing Square, to investors in a funding round expected to value the firm at about $10.5 billion, people familiar with the matter said. That deal is expected to close in the coming days.

Pershing Square managed about $16.3 billion in net assets as of the end of April; other asset managers with valuations in the same ballpark manage several times that.

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Pershing Square has been telling investors its valuation is warranted because it plans to bring in billions more in sticky assets. Today it primarily holds a concentrated portfolio of stocks of large companies it believes are undervalued, including Chipotle Mexican Grill and Universal Music Group.

Such a listing, should one happen, would be an anomaly in the world of hedge funds. After a burst of debuts just before the 2008-09 financial crisis, public markets soured on hedge-fund firms. The management and performance fees that make up hedge funds’ revenues can be unpredictable, assets can shrink if investors yank their money out, and returns can be volatile.

The market hasn’t been welcoming to new issues in general the past few years, though a string of successful initial public offerings this year suggest it could be turning a corner. Ackman isn’t planning to take his firm public until late 2025 or early in 2026, some of the people said.

Pershing Square has been refashioning itself into an asset manager with durable capital and less noise. Nearly all of its capital is now tied up in a closed-end fund, Pershing Square Holdings, whose shares trade on European stock exchanges. It has backed off of the bruising proxy battles and activist short selling that once defined the firm.

An IPO would punctuate a frenetic period for Ackman, a prominent investor who supercharged his profile with social crusades on X, formerly known as Twitter. His causes included campaigning to oust university presidents he saw as being too accommodative of antisemitism on campus.

Pershing Square received regulatory approval last year for a new type of investment vehicle that would buy a stake in a private company and take it public. Earlier this year, Ackman’s firm filed a prospectus for a new closed-end fund aimed at individual investors in the U.S. called Pershing Square USA.

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His "brand-name profile and broad retail following, along with a substantial media following, will drive substantial investor interest," the prospectus said. One of the people familiar with the matter said Ackman plans to write about new investments on X once the retail fund gets approved. (He is currently barred from marketing his Europe-listed fund to U.S. investors.)

About half of the roughly $1 billion Pershing Square raised in the pre-IPO round will be invested into Pershing Square U.S.A. upon its launch, which could happen as soon as July. The rest will anchor investments in funds Ackman plans to launch later on.

Pershing Square has told potential investors to compare it to asset managers like Brookfield Asset Management and Blue Owl Capital rather than hedge funds. Brookfield’s market value is about $15 billion; it has more than $925 billion in assets under management. Blue Owl’s market value is about $28 billion and it manages more than $174 billion.

The firm justified its rich valuation to investors by explaining that it expects to manage considerably more money, and eventually earn more in fees, after Pershing Square U.S.A. and other funds launch, people familiar with the matter said.  

One potential hurdle in winning assets: the replicability of Pershing Square’s portfolio, which had 10 disclosed positions as of April.

Investors who tried to go that route previously missed out on gains as the firm built positions, a person familiar with the matter said. They also missed out on complex hedging strategies that don’t need to be disclosed.

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Ackman is Pershing Square’s largest shareholder and stands to increase his net worth, estimated at $4.3 billion by Forbes, with a successful IPO of his management company. The move could also help retain talent and aid in succession planning, the people familiar with the matter said.

Ackman started Pershing Square in 2004 as an activist hedge-fund firm. It scored high-profile wins on Wendy’s and mall developer General Growth Properties.

He suffered a losing streak between 2015 and 2017 when big bets on drugmaker Valeant Pharmaceuticals and against supplement-maker Herbalife backfired. Since then, Pershing Square has been riding high. The firm made more than $5 billion in gains on hedging trades tied to the Covid-19 pandemic.

The European fund’s five-year average annualized return as of the end of 2023 was 31.2%, about double that of the comparable return of the S&P 500, including dividends. It gained 5.4% this year through April, after fees.