Bill Ackman’s Pershing Square slides on Wall Street debut

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Shares in Bill Ackman’s new fund slumped on its Wall Street debut as weak investor demand hit the hedge fund manager’s long-awaited double offering.

Pershing Square USA, a closed-end stock-picking fund, opened at $42 on Wednesday afternoon and closed at $40.90, down 18.2 per cent from its initial offering price of $50. Ackman’s hedge fund management company Pershing Square, which also began trading on Wednesday, closed at $23.79, just above its opening price.

To sweeten the deal, investors were offered one free share in Pershing Square for every five shares they bought in Pershing Square USA, leaving investors who took up the offer down about 9 per cent on the day.

The average first-day return for the 33 US IPOs this year that raised more than $50mn is a gain of 13.5 per cent, according to research group Renaissance Capital.

Pershing’s combined listing raised $5bn, far below the up to $10bn initially targeted.

Ackman had tried to raise $25bn for a similar listing of the fund in 2024 but pulled it after slashing the target to $2bn. The following year he laid out his vision to reinvent his hedge fund as a “modern-day Berkshire Hathaway” that would emulate Warren Buffett’s diversified holding company.

This week’s scaled-back offering hints at investors’ reluctance to back closed-end funds, which typically trade at a discount to their net asset value. Pershing Square Holdings, Ackman’s London-listed fund which has $16bn of assets under management, had a market value of about $9bn at the end of March.

Over the past dozen years, Ackman has morphed Pershing Square from a hedge fund with investors who could redeem their money in quarterly intervals to a manager of closed-end funds with perpetual capital that pays his investment group hefty fees.

It has allowed Ackman to make large, concentrated bets on companies without the fear of having to conduct a fire sale of assets if investors redeemed, a risk he had previously faced when he incurred large losses in companies such as Herbalife and Valeant Pharmaceuticals.

The shift has also meant his small investment operations can reliably generate hundreds of millions of dollars in management and incentive fees in years when equity markets rise.

Ackman, a prolific social media poster and loyal supporter of US President Donald Trump, has struggled to grow his company’s assets and raise fresh capital to seed new bets because his flagship closed-end fund, Pershing Square Holdings, has traded at a hefty discount to its assets.

To increase its investment firepower, Pershing Square Holdings has borrowed billions against its fund assets. Ackman also raised a large blank cheque vehicle in 2021 to broaden its investment options, but abandoned it in 2022. More recently he has built a large stake in a property developer it is using as an acquisition platform.

This year, when he revived the US fundraising effort, Ackman sought to entice investors using a fee holiday and by offering shareholders a free interest in his hedge fund management company.

While the incentive helped the listing of Pershing Square USA get off the ground on Wednesday, it now trades at a more than 15 per cent discount to its assets.