Bill Ackman has more ideas for PSUS

The basic problem with the IPO of Bill Ackman’s proposed US closed-end fund, Pershing Square USA, was that it could not offer discounts to investors. The sales pitch for PSUS funds was that the investor would pay $50 for a share and Ackman would invest that $50 (less some underwriting fees) on his behalf, in a portfolio consisting primarily of large-cap US stocks, but also some derivative investments. It is entirely possible that $50 of Bill Ackman’s investments could be worth more than $50; he has a good track record.

But it’s also entirely possible that $50 of Bill Ackman’s investments could be worth… less $50: Many closed-end funds, including Ackman’s own European fund, trade at a discount to net asset value. So when Ackman introduced his new fund to investors, it’s reasonable that they said, “Yeah, sure, I’d love for you to invest $50 for me. But I’d like to pay $45 for that. And judging by history, I’ll be able to pay $45 for a share a week after the IPO, so I’ll wait and do it.” If everyone thinks that, then the IPO can’t happen: you need to sell the shares at $50 before they can trade at $45. And, crucially, he You can’t sell the shares at $45: The goal of the IPO is to raise the $50 to put into the pot, and selling the shares for less than $50 doesn’t accomplish that.