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With the liberalization of the communications rules for public offerings in recent decades, many folks may have assumed that concerns about “gun-jumping” have largely been relegated to the ash heap of history.  Unfortunately, Pershing Square’s recent announcement that it is delaying the pricing of its IPO appears to provide an example of how companies can still stub their toes on the rules governing communications during the public offering process.

The company didn’t provide any reasons for delaying the IPO in its announcement, but it did reference a communication from Pershing Square’s CEO Bill Ackman to a handful of investors. That communication contained some information that doesn’t appear to have been in the company’s preliminary prospectus, and that, in some cases, is inconsistent with information in the preliminary prospectus.  This excerpt from a free writing prospectus that the company filed last Thursday explains the situation and the problematic comments made in Ackman’s communication:

On July 24, 2024, the communication attached as Appendix A was sent to a limited number of strategic institutional and high net worth investors in Pershing Square Holdco, L.P., which owns 100% of the Company’s investment manager, Pershing Square Capital Management, L.P. (the “Manager”) by William A. Ackman, the Chief Executive Officer of the Manager and the Company. Mr. Ackman sent Appendix A as an internal communication to the investors in Pershing Square Holdco, L.P. and therefore did not believe that it would require public disclosure.

You should not consider the statements in the communication attached as Appendix A in making your investment decision with respect to the Offering, including, in particular:

– The statements regarding the absence of key man risk. See “Risk Factors—Reliance on the Manager Risk—Key Personnel Risk” in the Company’s preliminary prospectus.

– The statements regarding the post-Offering trading dynamics, including with respect to market demand, trading discounts or premiums or trading volume. Shares of closed-end investment companies frequently trade at a discount from their net asset value. See “Risk Factors—Investment and Market Discount Risk” in the Company’s preliminary prospectus.

– The statements regarding the Manager’s historical performance. See “Appendix A – Supplemental Performance Information of the Affiliated Funds” to the Company’s preliminary prospectus.

– The statements regarding indications of interest from investors and any investor’s rationale for participation or non-participation in the Offering. Indications of interest are not binding agreements or commitments to purchase. Any investor may determine to purchase more, less or no Common Shares in the Offering. In addition, the underwriters may determine to sell more, less or no Common Shares in the Offering to any investor.

– The statements regarding the Pershing Square Tontine Holdings, Ltd. IPO.

The Company specifically disclaims the statements made by Mr. Ackman.

The typical remedy for gun-jumping is an SEC-imposed “cooling off” period that delays the offering for a period of time in order to allow the impact of the communication on the market to dissipate. My guess is that’s what’s prompting the delay here.

– John Jenkins