Bill Ackman’s Fund Launch Faces Challenges on Wall Street
Bill Ackman’s anticipated launch on Wall Street took a disappointing turn on Wednesday. His new closed-end fund suffered an 18% drop in stock price on the New York Stock Exchange, even with the hedge fund mogul touting it enthusiastically on social media.
Pershing Square USA Inc. (PSUS), marketed as a way to provide hedge fund-like returns to everyday investors, started trading at $42 per share, which was a 16% decrease from its public offering price of $50, eventually closing at $40.90.
The initial public offering (IPO), combined with a private placement, garnered $5 billion on Tuesday night, marking the largest sum ever raised by a U.S. closed-end fund.
Ackman envisions this fund as a model similar to Warren Buffett’s Berkshire Hathaway. He sees it as a resilient capital source capable of weathering challenges and growing over decades.
“For the first time, anyone with $50 can become a long-term shareholder,” Ackman declared on CNBC’s “Squawk on the Street.”
He pointed out the usual disparity where retail investors often face disadvantages compared to institutional ones. “We’ve flipped that script,” he stated, promising an annual meeting reminiscent of Berkshire’s where regular investors could voice their concerns directly to him.
Yet, the market’s reaction was less than favorable.
Those who purchased five shares of PSUS at the offering price were rewarded with an additional PS share for free, aiming to highlight Ackman’s 2% flat management fee. However, this innovative approach raised more eyebrows than excitement, further fueling skepticism about the fund’s potential to escape the persistent discounts often faced by closed-end funds.
“We might see some interest, but the use of the management company’s stock as an incentive indicates that merely offering closed-end funds might not suffice to satisfy investors’ expectations,” noted Lucas Muhlbauer, an IPOX research associate.
Closed-end funds frequently trade below the actual value of their holdings. Ackman attempted to mitigate this issue by scrapping performance fees and offering shares in management.
This marked Ackman’s second attempt at an IPO for this fund; a previous launch in 2024 was shelved due to disappointing interest.
Ackman enthusiastically opened the New York Stock Exchange bell alongside his wife, Neri Oxman, and chief investment officer Ryan Israel, receiving loud applause from those present on the trading floor.
However, the cheers quickly faded once the share prices were revealed. Ackman’s strategy was designed to address a longstanding challenge in finance: unstable capital that forces managers to sell during unfavorable conditions.
In contrast to open-end mutual funds—which allow daily share redemptions—PSUS requires investors to commit their funds upfront. Those wanting to sell must do so on the exchange, preventing hurried liquidations or panicked withdrawals.
