Pershing Square's new SPAC; The Greatest Trade Ever; Boaz Weinstein Is Making Bank; I'm going to be a dirtbag climber for the next week or two

By Whitney Tilson

Wednesday, June 24, 2020

1) Pershing Square Capital Management just filed an S-1 for Pershing Square Tontine Holdings…

This will be the largest-ever “blank check” company (also known as special purpose acquisition companies, or “SPACs”). Pershing anticipates raising at least $4.0 to $6.45 billion, maybe more. The structure is much more shareholder-friendly than the typical SPAC, and the opportunities are compelling when so many businesses are being affected by the coronavirus.

Here are some excerpts from the S-1:

We also believe that the economic and market dislocation resulting from the COVID-19 pandemic has created market conditions and a resulting set of investment opportunities in four principal areas that we intend to pursue.

First, as a result of the currently high degree of stock market and debt capital market volatility, it has become increasingly difficult for even a high-quality, well-managed, large capitalization company to execute a public offering on favorable terms…

Second, over the past decade, numerous high-quality, venture-backed businesses have achieved significant scale, market share, competitive dominance and cash flow – we call these companies “Mature Unicorns.” Many of these companies have chosen to remain private, as there has been, until recently, limited pressure from their investors for liquidity, and large amounts of growth capital available from investors, mutual funds and hedge funds. The recent dislocations in both the stock market and private growth equity markets, combined with a number of high-profile private investment failures and disappointing IPO outcomes, have substantially reduced the amount of private funding available for these companies, while demands for liquidity from their investors have increased.

Furthermore, the short-term impact of COVID-19 on many of these Mature Unicorns has, even with respect to many of the highest quality companies in this sector, reduced their revenues and cash flows, thereby increasing their need for additional capital…

Third, the economic disruption of COVID-19 has substantially negatively impacted the revenues and cash flows of many large private equity portfolio companies. In light of their typically highly leveraged balance sheets, these companies will likely require substantial equity infusions to withstand the impact of the crisis…

Fourth, the economic disruption of COVID-19 has also negatively impacted the revenues and cash flows of many large, high-quality, private family-owned companies, which will require them to raise equity capital.

Here’s a Bloomberg article about it: Ackman’s Blank Check Company Could Raise Up to $6.45 Billion.

2) Speaking of Ackman, this 12-minute video takes an in-depth look at the incredible investment he made earlier this year: The Greatest Trade Ever.

I wrote about this in my March 27 e-mail. Excerpt:

Bill Ackman of Pershing Square Capital Management just made the greatest trade of all time (in my judgement – based on the percentage gain, dollar profit, the speed of the gain, and the perfect timing). He made almost a 100x return in less than two months, turning a $27 million investment into a $2.6 billion profit!

According to this letter he just released, earlier this year he became “extremely alarmed about both the health risks of the coronavirus and its economic impact.” To hedge his portfolio, he “purchased credit default swaps (CDS) on various investment grade and high yield credit default swap indices, namely the CDX IG, CDX HY, and ITRX EUR,” which “were trading near all-time tight levels of about 50 basis points per annum.”

Ackman’s thesis was simple:

Because we believed that the coronavirus could only be stopped in Europe and the U.S. with an unprecedented economic shutdown, based on what we learned from China, we were confident that U.S. and European credit spreads would likely widen substantially from their near-all-time lows.

In short, he saw exactly what was going to happen – and figured out the perfect way to profit from it.

Ackman has also made what I think will prove to be another brilliant move: exiting the hedge and plowing all of the gains into buying more of the stocks of the high-quality companies in his portfolio, whose stocks have all been whacked, including Berkshire Hathaway (BRK-B), Lowe’s (LOW), Hilton Worldwide (HLT), Agilent Technologies (A), Restaurant Brands (QSR), and Starbucks (SBUX).

3) I really enjoyed this in-depth profile of Wall Street legend Boaz Weinstein: Boaz Weinstein Is Making Bank. He’s Not Happy That You Know About It. Excerpt:

For just the first two weeks of March, the flagship Saba Capital Master Fund spiked 33%, according to a note sent to investors that was reviewed by Institutional Investor. A second offering that was designed specifically to benefit from steep market selloffs, the Saba Capital Tail Fund, was up an astounding 99%. Even a third, hedged Saba strategy that seeks to profit from arbitrage in the closed-end fund market lost only 1.5%, while the S&P 500 tumbled more than 7%.

Despite this apocalyptic backdrop, the trade was vintage Weinstein, producing an outsize gain for Saba while risking a small amount of capital. “Asymmetric payoffs in the credit markets,” he says. “That’s really our funds’ focus.”

This year through May, the Saba Capital Master was up more than 80%, according to a person familiar with the fund.

Every market crisis vanquishes a swarm of speculators. But it also lifts a chosen cadre to exalted status based on their ability to sidestep doom and wring lucre from others’ misfortune.

I know Boaz and agree entirely with this:

Oddly, for the cut-throat world of big egos and sharp elbows, nearly everyone who crosses paths with Weinstein seems to… like him.

“He was this great combination of super polite, humble, and smart,” says Ron Tanemura, who okayed hiring Weinstein at Deutsche in 1998.

“A real gentleman,” adds David DeLucia, a former Goldman Sachs partner and chess opponent.

4) I’m in the climbing mecca of the world (Yosemite/Eastern Sierras), have an awesome guide, Paul, whose schedule is wide open (as is mine), the forecast is perfect, and there’s no coronavirus anywhere near here, so I’ve decided to stay out here for another week or two.

Paul and I are going to be prototypical “dirtbag climbers” – living out of his van and climbing pretty much every day…

After finishing The Nose of El Capitan on Saturday, I felt fine, so the next day Paul’s wife, Breezy, took me on a not-too-difficult climb called Royal Arches, which, like The Nose, is rated one of the “Fifty Classic Climbs of North America.”

On Monday, Paul and I did two shorter climbs, a very challenging one called Commitment (rated 5.9), followed by an easier one called Munginella (rated 5.6). And yesterday, we did the East Buttress of Middle Cathedral (my first 5.10a), another one of the “Fifty Classic Climbs.” 

Stay tuned for photos!

Best regards,


Whitney Tilson
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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

Click here for the full bio.