The markets are abuzz with rumors and speculation about the target of Pershing Square Capital Management's next single-company fund. But there may be less to the vehicle than Pershing Square's William Ackman hopes.
Ackman announced plans for the special-purpose vehicle—without identifying the company it would invest in—this week and said he planned to raise $1 billion for it in just 10 days. There is skepticism that he'll be able to do it, however, fueled by word that at least one major client is taking a pass on it.
"We were notified of the PS special vehicle, but will not be investing as it has a longer lock-up than what we'd like," Jason Goeller of the Public Employees Retirement Association of New Mexico told Reuters. The fund will have a three-year lockup.
Also potentially hurting the aggressive fundraising effort is the dismal performance of Pershing Square's last single-stock fund, which invested in retailer Target Corp. That fund lost 90% of its value in its first two years. Other Pershing Square single-stock funds have done better, however.
Meanwhile, Wall Street is trying to figure out exactly what company Ackman has in mind. In his letter to investors, he said only that it is a large-capitalization, investment-grade U.S. corporation operating primarily in a single business that is "simple, predictable and free-cash-flow-generative," with "high barriers to entry, high customer switching costs and substantial pricing power."
The rumor-mill has churned up FedEx Corp. and security company ADP Corp., although some FedEx analysts have cast doubt that the shipping giant fits Ackman's criteria.