#Bill Ackman calls it quits on his giant SPAC days after shareholder lawsuit

Billionaire investor Bill Ackman said he’s throwing in the towel on his giant blank-check company — just days after he was slapped with a shareholder lawsuit that claims it was set up illegally.

In a Thursday letter to shareholders of his $4 billion special-purpose acquisition company, or SPAC called Pershing Square Tontine Holdings, Ackman told investors he plans to return their money and blames the lawsuit for ruining his chances of closing a deal to buy a 10-percent stake in Universal Music Group.

“Our ability to complete a transaction in the required time frame has been impaired by the lawsuit,” Ackman wrote in the letter. While his firm Pershing Square Capital believes the suit is “meritless,” he added that it “may have a chilling effect on the ability of other SPACs to consummate merger transactions or to engage in IPOs.”

The lawyers who brought the suit, former SEC commissioner Robert Jackson and Yale Law professor John Morley, allege Ackman’s SPAC has been illegally acting as an investment company instead of an operating company, also alleging that Ackman has improperly positioned himself to reap hundreds of millions of dollars in fees.

“We are gratified to see that just two days after we filed our lawsuit, the world’s largest SPAC is now offering to mail back over $4 billion worth of checks to investors,” Jackson and Morely said in a statement.

Ackman, however, said “all is not lost,” noting that Pershing is “working on obtaining approval” from the Securities and Exchange Commission for an entirely new kind of blank check company — a SPARC or special purpose acquisition rights company, which only asks investors for cash if it finds a deal.

Ackman, who has just 11 more months to find a target before he will be forced to return money to shareholders, said the vehicle could be approved by the SEC “shortly.” If the SPARC is approved, Ackman will return investors the $20 per share they spent and give them a warrant to buy into the SPARC when it closes a deal.

Some investors took to a Pershing Square Reddit board to air their grievances — and posted comments like “f***” Bill Ackman” and “Bill Ackman should be charged with securities fraud.”

Early Friday morning Ackman posted on Twitter how a SPARC would preserve optionality for shareholders by letting them by into the deal when the timing made sense. He added that in some cases its better to create a new entity than reform an existing one.

In June, Ackman announced he’d use his SPAC to buy the UMG stake after nearly a year of searching for a target. After pushback from the SEC, which among other issues questioned whether the deal met the New York Stock Exchange’s listing requirements, he announced he would be purchasing a stake through his hedge fund instead of a SPAC.

SPACs are shell companies that raise money in the public markets and then use that money to merge with a private company and take it public. Pershing Square Tontine shares ended the day down 1.3 percent, to $19.73.