Bill Ackman's SPAC Snags a Slice of Universal Music Group

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Jun. 21 2021, Published 11:45 a.m. ET

Bill Ackman is looking to up his game. His latest partial acquisition has boosted his SPAC, Pershing Square Tontine Holdings (NYSE:PSTH), with a deal worth 10 percent of Universal Music Group.

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How does this new Universal investment impact the market, and what can investors expect from Ackman's SPAC?

All about the Pershing-Vivendi deal leading to Ackman's Universal stake

Vivendi (OTC:VIVHY) is a French media corporation with a market cap of $40.83 billion. Among other notable roles, it's the parent company of Universal Music Group.

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Universal, founded in 1934 and headquartered in Philadelphia, has been the source of numerous successes over the years. Recently, the company propelled musicians like Ariana Grande and Billie Eilish into stardom. Historical rapport includes The Beatles and Nirvana.

Through his SPAC with the ticker "PSTH," Ackman acquired a 10 percent stake in Universal. This is a fraction of Universal's overall valuation of $42 billion, which means that he invested approximately $4.2 billion in the deal.

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It's a rather complex route toward an investment, given the fact that Ackman is working through his SPAC and Universal is working through its parent company. However, it seems to work for all of the entities involved, including Vivendi.

When will the Ackman Universal deal finalize?

The deal for Ackman to acquire 10 percent of Universal through his SPAC is expected to be finalized by Sept. 15.

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Universal deal foreshadows an international stock listing

Reports suggest that Vivendi plans to list Universal for its own IPO. However, American investors shouldn't get too excited since Vivendi isn't planning on listing the company in the U.S. Instead, Vivendi is targeting Amsterdam for the Universal listing. Vivendi expects the listing to come sometime in September after the Ackman SPAC acquisition finalizes.

How Pershing Square stock is responding to the news

Pershing Square Tontine Holdings stock could fluctuate in unexpected ways following the forthcoming international Universal listing. For now, PSTH stock is up 0.31 percent in the short term following the news.

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This comes after a steep correction sending Pershing down 11.94 percent overnight, which puts the YTD returns in the red by 15.34 percent.

PSTH stock: Should investors bite?

PSTH will likely be a unique SPAC in that it expects to hold more than one company, so the long-term outlook for Ackman's SPAC isn't predictable.

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The Vivendi-Pershing announcement was officially unveiled in the middle of the night on June 20. Investors who get in early have the potential of getting ahead of the crowd since the Universal deal has a few months until finalization. The company is a reported "industry leader in a stable competitive environment" with "minimal net financial leverage."

Regardless, there's an inherent risk involved in any SPAC investment, Pershing Square Tontine included.

Investors appreciate Ackman's track record in the SPAC and hedge fund management department. However, this new and complex method of SPAC acquisition could reap different results. For some traders, that's a risk they're willing to take.

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