Bill Ackman placed responsibility for a steep, one-day sell-off in his newly listed closed-end vehicle on retail buyers, saying many were allocated shares they could not ultimately pay for and thus were forced to sell.
Speaking to foreign journalists on Thursday, Ackman said retail investors do not know how to participate in initial public offerings - comments made one day after his stock-picking fund and its manager began trading on the New York Stock Exchange.
The Pershing Square USA listing was presented as a chance for everyday investors to access strategies typically available to the very wealthy. That positioning came amid disclosure that the fund has lagged the broad stock market in recent years even as Ackman pointed to the fund's long-term performance metrics.
Ackman noted his closed-end fund has produced an average annual return of 25% over the past eight years, which he said outpaced peer funds. He argued that the sudden decline in the newly listed shares was driven by retail buyers who had been overallocated at the IPO, then lacked the cash to settle their purchases and therefore sold their positions.
Pershing Square USA (NYSE:PSUS) was priced at $50 on listing day. On Wednesday the shares fell to $40.90, representing roughly an 18% intraday decline from the IPO price. By Thursday the stock had recovered more than 6% to trade at $43.54, but it remained below the initial $50 offering level.
"We had a whole bunch of people dump that stock yesterday for technical reasons," Ackman said, attributing the move to settlement- and allocation-related selling rather than a change in the fund's fundamentals.
While Ackman emphasized retail selling, institutional investors accounted for more than 80% of the capital raised in the offering, a detail that has prompted questions about the mechanics behind the decline and which investors were actually responsible for the trading flow on Wednesday.
The episode highlights tensions between retail access initiatives and the technical and settlement mechanics of equity allocations at IPOs. Ackman maintained confidence that the shares would recover, noting the partial rebound on Thursday, while the listing remained below its initial price point.
Details in Ackman's comments and the trading moves leave open which market participants ultimately drove the sharp drop, and the issuer's positioning of the offering as a retail-access product contrasts with the predominance of institutional capital in the placement.