How Bill Ackman Just Made the SPAC Market Even Hotter

Andy Snyder|June 7, 2021

The SPAC trade isn’t just heating up… It’s getting red-hot.

Special purpose acquisition companies – that’s the fancy name for the companies behind these deals – are quickly becoming some of the biggest movers in the market.

Subscribers to our popular Venture Fortunes research advisory know the facts well. Last week, their shares in a pre-IPO stake jumped more than 12% in a day as the SPAC we recommended took its prize public.

The fun is far from over.

This unique and little-understood segment of the market is getting hotter than ever.

As last week came to a close, we got word of what may turn out to be the biggest SPAC deal ever.

Bill Ackman’s high-powered Pershing Square confirmed it is in talks to buy a 10% stake in Universal Music Group.

It’s a massive $4 billion deal that puts the value of the mega-producer north of $40 billion.

But here’s the really big news…

Ackman’s SPAC, known as Pershing Square Tontine Holdings (PSTH), is not likely to merge with Universal. That’s the standard practice. A SPAC merges with a pre-IPO company to efficiently and quickly take it public.

But Universal already has an IPO plan that will put it on a European exchange later this year. It doesn’t need Ackman or his stock symbol.

It could use cash, though.

That’s where a world-class investor like Ackman comes in. He’s pulling the strings to get his SPAC investors shares of a pre-IPO company they would not otherwise be able to get.

Dealmakers

As we’ve pointed out many times before (as recently as Saturday, in fact), the trick to making money with SPACs isn’t a sexy story or a headline-making deal. It’s all about the management team.

Get that right, and the other steps tend to fall into place naturally.

Here’s what Ackman said last Friday that hammers the point home…

Universal Music Group is one of the greatest businesses in the world. Led by Sir Lucian Grainge, it has one of the most outstanding management teams that I have ever encountered.

Importantly, UMG meets all of our acquisition criteria and investment principles as it is the world’s leading music company, with a royalty on the growing global demand for music.

That quote says a lot. It shows that Ackman – a great investor himself – is on the prowl for a best-in-class management team. Once he finds one, he knows a great business is likely to follow.

In this case, it’s one of the strongest in the world.

The bottom line is clear. If you’re not devoting a small portion of your portfolio to SPACs, you’re missing out on the hottest sector of the stock market right now.

For the specifics of what we look for in a SPAC – plus details on our favorite deal right now – check out our recent interview on the subject.

P.S. The SPAC we detail here has a very big announcement coming later this week. Shareholders are set for some good news on June 10. The full story is here.