Bill Ackman’s bold move: Taking Pershing Square public in 2024

According to Reuters, billionaire investor Bill Ackman plans to take his hedge fund firm Pershing Square and a new investment fund called Pershing Square USA public early next year. The Wall Street Journal reports the new fund will trade on the New York Stock Exchange and offer investors free shares in Pershing Square as an incentive. Partners could give away up to 10% of Pershing Square shares, potentially valuing the firm well above its $10.5 billion valuation from 2024. The Financial Times separately reported Ackman was preparing a Pershing Square listing without mentioning the new fund. Talks are preliminary and could be delayed depending on market conditions.

Ackman’s big bet

This is a fascinating move from someone who’s become as much a media personality as an investor lately. Ackman’s been everywhere – from his elaborate market commentary to his political takes that get watched in both New York and Washington. Now he’s essentially trying to create a publicly traded vehicle that replicates his success.

Here’s the thing though – hedge funds have had a pretty mixed record in public markets. The unpredictability of their earnings makes them tough for public market investors to value consistently. Look at British hedge fund Man Group – they’re heading for their third negative year in four. Meanwhile, Ackman’s Europe-listed Pershing Square Holdings is up nearly 21% this year. So which version of hedge fund performance will public investors get?

The incentive play

The free shares angle is clever marketing. Basically, they’re trying to sweeten the deal for investors who might otherwise be skeptical about buying into a hedge fund structure. But giving away up to 10% of the firm’s equity? That’s not nothing.

And let’s talk about that $10.5 billion valuation from last year’s 10% stake sale. Reuters called that a “precursor to a potential IPO” at the time, and now we’re seeing that play out. But market conditions have been rocky lately – we just had the longest-ever government shutdown disrupting IPO processes. Timing everything right will be crucial.

Hedge funds going public

If this goes through, Pershing Square would join a pretty exclusive club. Private equity giants like Blackstone and KKR have thrived in public markets, but pure-play hedge funds are much rarer. The earnings volatility is just fundamentally different.

It’s worth noting that Ackman has previously compared his business structure to Blue Owl Capital, which is down nearly 40% this year amid credit market worries. That comparison might make some investors nervous given current market conditions.

So will this dual offering actually work? The structure seems innovative, and Ackman’s recent performance has been strong. But public market investors tend to prefer predictable earnings streams, which is exactly what hedge funds don’t provide. This could be a tough sell despite the free shares incentive.