How Bill Ackman’s Sparc differs from a SPAC


Ackman disclosed last week that Sparc received approval from the US Securities and Exchange Commission to raise a minimum of US$1.5bil from investors for the acquisition of a private company. — Reuters

NEW YORK: Bill Ackman’s new investment vehicle, Pershing Square Sparc Holdings Ltd, marks a departure from special-purpose acquisition companies (SPACs), which have lost favour on Wall Street as deals soured.

Ackman disclosed last week that Sparc received approval from the US Securities and Exchange Commission (SEC) to raise a minimum of US$1.5bil from investors for the acquisition of a private company.

Sparc, which stands for special-purpose acquisition rights company, is similar to a SPAC in that it will act as a shell to combine with and list another company in New York, infusing it with capital in the process.

One of the biggest differences between the two is that a Sparc doesn’t require up-front money from investors like a SPAC does.

A SPAC raises capital from investors in an initial public offering (IPO) by only disclosing the general characteristics of a company it may seek to buy, rather than naming the specific target.

SPAC investors are given the option to vote down an acquisition or redeem their shares once a deal has been announced.

Sparc will only ask for money from investors once it has clinched and disclosed a deal to buy a company.

It has distributed “acquisition rights” for free to investors in Ackman’s previous investment vehicle, who will then be given the option to invest once Sparc has a deal.

Ackman’s previous investment vehicle was a SPAC called Pershing Square Tontine Holdings, which raised US$4bil in an IPO in 2020 and went on to ink a deal for a 2.9% stake in Universal Music Group at a €35bil (US$37bil) valuation the following year.

Tontine abandoned the deal after the SEC questioned its unconventional structure, which also attracted shareholder lawsuits. Ackman returned the money last year.

Sparc gets up to 10 years to complete a deal, compared with most SPACs that face a deadline of between two and three years.

Unlike a SPAC, the amount of money Sparc seeks from investors will vary based on the size of the deal it pursues.

It will be a minimum of US$1.5bil, and Ackman’s hedge fund Pershing Square has pledged to put in between US$250mil and US$3.5bil as an anchor investor. — Reuters

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