$PSTH now that we have some details on the deal what are my thoughts.
Pershing Square Tontine Holdings recently releases the planned details of their SPAC merger and will the deal may not be final I wanted to take some time and discuss my thoughts on the investment and its quality. First I will disclose I am a holder of the stock and there may be some bias in this opinion. Also for those looking for financial advice or investment advice, this is not that and should not be taken as such it is simply my thoughts as a random Tontard.
Recently there was a press release on the planned $PSTH deal being a stake in Universal Music Group; a stake in a Remainco acquisition tool to allow for a future acquisition, and a rights access to a future special purpose investment without opportunity cost as exercising will be requested once a target is identified over the course of 5 years. A cherry on top of continuous SPARCs for holders has also been discussed on Twitter. This is a lot to take in so I’m going to go through it one bite at a time the same way you eat an elephant since this is elephant hunting.
The first part Universal Music Group. Universal Music Group is the world’s leading music corporation. They represent many of the major acts in current and historical pop culture. Universal is a household name so that bodes well for it. They provide continuous revenue streams from royalty earnings, streaming, and other areas. Holders of PSTH are getting 0.643 shares per share of PSTH. They will still have their PSTH shares at the initial amount and will get their tontine warrants. The press release also refers to IPO holders which confused some on Twitter. This simply means holders before the units split when it was $PSTHU since there was 1/9 warrant issued in September the press release explaining the offering for those warrants and right to exercise for more PSTH but not UMG. UMG shares would be issued to holders by December based on the timeline released and would be available on US exchanges at that time more than likely as the article talks to SEC registering the company during the process. A comparison for UMG might be warner music group but remember UMG is a larger entity so the math would need to be adjusted when doing valuation. Currently, WMG has the following interesting attributes which could be good for UMG as well. They offer a dividend yield of 1.39% this bodes well for UMG to offer a dividend or have strong cash flows to reinvest as their revenues are higher than WMG. Either would is good for shareholders. UMG like WMG is also getting involved in NFTs this creates another revenue stream for the crypto community. UMG is also heavily involved in digital innovation and if you review their website you will see some of the initiatives. One that I found interesting was digital innovation licenses which “enable entrepreneurs to test products and prove concepts with licensed musical content. To assist, UMG pioneered a streamlined license designed to grant access to UMG’s catalog to qualifying early-stage companies with developing user bases”. This means they are working on multiple new ways to create further royalty income streams in the future. Overall UMG has the potential to be a solid growing value investment with long-term price growth potential.
The second major part is Remainco which will retain the $PSTH ticker symbol. This is going to be a more SPAC-type deal and will not be a minority holding deal. From the press release, it sounds like there are already some companies in play and the deal should move fast. Potentially can expect results by year-end. There are many targets that can be speculated here so I will let Twitter and Reddit do that but some interesting ones are as follows.
- Plaid (Fintech great growth area);
- Only Fans (great way to align with creators and goes with continuous income stream; a little bit different but has potential)
- Toast (food fintech right up Ackman’s alley with investments in Chipotle, burger king, Dominos, etc.)
- Subway, Blimpie, in and out, other food companies.
- Private equity spin-out, etc. many options here with lots of potential to come and majority stakes are possible.
The third major part is the Special Purpose Acquisition Rights warrant. This allows for a lot bigger potential Play and I’m sure there are some targets in mind but this will be a true elephant so think big here. PSTH holders get a 1 to 1 SPRAC warrant and if this is a good deal that that leads to the icing on top.
Fourth is the tweet below where continuous SPARCs could happen. Will this was not talked about too much in the press release PSTH but earlier on in the PSTH saga it was mentioned that Bill’s tweets could be material announcements so I would expect more information to come in this in the future. This means if the deals are good this almost like creating a tontine fund with continuous deals for true tontines. This is almost like getting to have access to your own Private Equity vehicle with board tights on deciding to take part in an investment and grow a diversified lifetime portfolio. Definitely an interesting concept and will be interested to see what comes of it.
Overall it’s a very interesting play and I expect some great things from it. Also for those shareholders don’t forget to get up early on June 23 for the video presentation from Bill. Comparing it to previous transactions many of the well-known brokers should be able to handle the deal structure but call your broker if there are questions. I use TD ameritrade and have had a deal done similar to this from Bill on $GGP years ago and it worked fine. I did have to call the broker to exercise some warrants over the course and well it is not a 1 for 1 comparison it has similar elements. Since Schwab is in the process of merging with TD Ameritrade I would expect them to be fine along with fidelity. Robinhood and Webull and other newer ones may need to be discussed.
As always this is not and should not be taken as financial advice this is just my thoughts. Good luck to all shareholders.