Analysis PSTH

Pershing square's new SPARC structure

, seeking alpha

Pershing Square Tontine‚Äôs (PSTH) structure was a different and far better structure from the get-go. Incentives were perfectly aligned already, as their structure had a large upfront commitment by the sponsor Pershing Square Holdings (OTCPK:PSHZF) and no promote shares. But, time pressure due to the two year deadline and funds being tied up until a deal is announced were negatives. As evidenced by their press release, they are innovating to reach the holy grail of truly democratizing the IPO process. Both the above negatives are addressed by the SPARC structure: instead of raising capital upfront, they are issuing rights to existing holders of Pershing Square Tontine. Further, as there is no capital raise upfront, there are no underwriting fees involved.

The new SPARC structure unveiled in a press release last Friday shows how they are improving the already superior tontine structure even further. The SPARC structure has the potential to truly democratize the IPO process. Although the market reacted unfavorably to the Universal Music Group deal, it is only a matter of time before the market realizes the benefits of the excellent albeit complex deal being worked on.

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