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Why Pershing Square Tontine Holdings, Ltd. (PSTH) stock is Going down in Pre-Market?

Shares of the Pershing Square Tontine Holdings, Ltd. (PSTH) stock were falling today on June 4, 2021, following the announcement of talks between PSTH and Vivendi S.E for the acquisition of 10% ordinary shares of Universal Music Group (UMG). PSTH  stock price saw a downtrend of 7.11% to drop at  $23.27 a share at the time of this writing. At the previous closing, the per-share price of PSTH  stock was $25.05 with a 0.56% gain. Let’s check out the recent events of PSTH stock in depth.

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What’s Happening?

The special purpose acquisition company confirmed its talks with Vivendi order to acquire the 10% ordinary shares of the UMG. The amount for this acquisition is nearly $4.0 billion which represents the enterprise value for UMG worth €35 billion. However, this transaction doesn’t mean the combination of PSTH stock with UMG.

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PSTH stock did not finalize the information related to sponsor and director warrants and talks between both PSTH and UMG are ongoing in this matter considering different options.

PSTHRemainco will have  $1.5 billion cash even after the purchasing of UMG shares and bearing the related expenses. Moreover, there would be an amendment in the forward purchase agreements according to which it would not be obligatory for Pershing Square Funds to purchase roughly $1.4 billion of PSTH’s Class A common stock for the financing of future business combination transactions. 29% of PSTH Remainco will be owned by the Pershing Square Funds prior to the exercising of any Additional Forward Purchase Agreements.

Future Plan

PSTH stock has a plan to distribute the ordinary shares of UMG to its shareholders later this year after the completion of the previously announced UMG listing in Euronext Amsterdam which is expected to happen in the third quarter of 2021. Furthermore, this transaction is a stock purchase rather than a merger agreement thus not allowing the UMG to exercise shares of the PSTH stock.

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It looks like investors are not happy with this recent news announced by the PSTH stock as the stock price began to fall in response to the latest news. From a long-term investment perspective, it is better to analyze the nitty-gritty of the PSTH stock before adding it to the portfolio. 

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