Bill Ackman eyes IPO of Pershing Square

Bill Ackman plans to take his investment firm public as soon as next year, the hedge fund manager’s boldest move yet to leverage his social media fame.

Ahead of the IPO, Ackman plans to sell shares in Pershing Square to investors in a deal that could value the company at about $10.5 billion, according to people familiar with the matter. The deal is expected to close in the coming days.

Pershing Square had about $16.3 billion in net assets under management as of the end of April, but other asset managers with similar valuations managed several times that amount.

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Pershing Square has told investors that its valuation is reasonable because it plans to raise billions of dollars more in fixed assets. Currently, the firm mainly holds shares in large companies it believes are undervalued, including Chipotle Mexican Grill Inc. and Universal Music Group Inc.

Such a listing, if it were to happen, would be unusual in the world of hedge funds, where stock markets have cooled off since a rush to do so in the run-up to the 2008-09 financial crisis. Hedge funds’ revenue comes from unpredictable management and performance fees, and as investors pull out, assets can fall and profits can be volatile.

The market has not been kind to IPOs in recent years, but a string of successful offerings this year suggest things are turning around. Mr. Ackman doesn’t plan to take his company public until late 2025 or early 2026, some of the people said.

Pershing Square is transforming itself into a more well-capitalized, quieter asset manager. Nearly all of its capital is now invested in Pershing Square Holdings, a closed-end fund whose shares trade on European exchanges. The firm is backing away from the fierce proxy fights and activist short selling that once characterized it.

The IPO would cap a tumultuous period for Ackman, a prominent investor who rose to prominence through social activism on X (formerly Twitter), including a campaign to oust a college president he deemed too tolerant of anti-Semitism on campus.

Pershing Square received regulatory approval last year for a new type of investment vehicle that would buy shares in privately held companies and take them public. Earlier this year, Mr. Ackman’s firm filed a prospectus for a new closed-end fund called Pershing Square USA, aimed at U.S. retail investors.

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His “strong brand, broad retail endorsements and significant media support are expected to generate significant investor interest,” the prospectus said. A person familiar with the matter said Mr. Ackman plans to write about the new X investment once the retail fund is approved. (He is currently barred from pitching European exchange-traded funds to U.S. investors.)

Of the roughly $1 billion Pershing Square has raised in its pre-IPO round, roughly half will be invested in Pershing Square USA’s launch, which could happen as soon as July, while the rest will go towards investing in future funds that Ackman plans to launch.

William Ackman, founder and CEO of hedge fund Pershing Square Capital Management, speaks at the Thorn Investment Conference in New York on May 4, 2015. (REUTERS/Brendan McDiarmid/Getty Images)

Pershing Square tells potential investors to compare it not to hedge funds but to asset managers such as Brookfield Asset Management and Blue Owl Capital. Brookfield has a market cap of about $15 billion and more than $925 billion in assets under management. Blue Owl has a market cap of about $28 billion and more than $174 billion in assets under management.

The firm justified its high valuation to investors by saying it expects significantly more money under management after the launch of Pershing Square USA and other funds, and ultimately more fee revenue, according to people familiar with the matter.

One potential hurdle in acquiring assets is the replicability of Pershing Square’s portfolio, which had 10 positions publicly available as of April.

Investors who have tried this route in the past have missed out on gains as the company built up its positions, according to people familiar with the matter, as well as complex hedging strategies that it doesn’t have to disclose.

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Ackman is Pershing Square’s largest shareholder, and a successful IPO for his management company would add to his net worth, which Forbes magazine estimates at $4.3 billion. The move could also help with talent retention and succession planning, the people said.

Mr. Ackman founded Pershing Square in 2004 as an activist hedge fund that has had high-profile wins with Wendy’s and shopping-mall developer General Growth Properties.

After a string of losses between 2015 and 2017, when big investments in drug company Valeant Pharmaceuticals and supplement maker Herbalife backfired, Pershing Square has been going strong since then: The company made more than $5 billion in profits from hedging trades tied to the coronavirus pandemic.

The European fund’s five-year average annualized return as of the end of 2023 is 31.2%, roughly double the comparable return for the S&P 500, including dividends. Through April this year, its return after fees was 5.4%.