By Svea Herbst-Bayliss and Niket Nishant
(Reuters) -Hedge fund manager Bill Ackman said on Tuesday that is his new portfolio in the United States will raise roughly $2 billion in capital, a fraction of the $25 billion the billionaire investor had initially expected to bring in.
Pershing Square USA, Ackman's first new investment vehicle in a decade, expects to sell up to 40 million shares priced at $50 each. It will begin trading on the New York Stock Exchange under the symbol PSUS on August 6, a person familiar with the matter said on Tuesday.
Institutional investors have until Friday to express interest while retail investors, who may have become familiar with Ackman through his frequent postings on social media platform X, had until July 24 to submit interest.
Banks including Citigroup Global Markets, UBS Securities, BofA Securities and Jefferies have been granted an option to purchase an additional 6 million shares at the IPO price. The 45-day option, if exercised, would add $300 million more for the fund. Ackman's firm Pershing Square Capital Management put $500 million into its new U.S.-listed investment holding company, the hedge fund manager said in a presentation earlier this month.
Raising roughly $2 billion in a closed-end fund structure is considerable after no new closed-end funds were raised last year and only six were raised in the previous year, according to industry data.
But it is only a fraction of the $25 billion that investors thought Ackman might be able to raise when he unveiled plans in February for the offering that will mimic his hedge fund while charging lower fees and offering quicker access to capital.
That amount of cash would have more than doubled the $19 billion in assets Ackman already oversees, increasing the pressure to find new winning investments to continue his strong performance track record.
By last week, Ackman sensed potential investors' growing unease with the closed-end fund structure and how so much capital could be invested. In a letter to people who own a stake in his management company, Ackman said last Wednesday that he was capping the size of the offering at $10 billion and was expecting to see between $2.5 billion and $4 billion in new cash come in.
The most "important factor for creating long-term value for Pershing Square Inc (NYSE:SQ). is not the size of the PSUS IPO, but how it trades in the market," Ackman wrote in the letter which his lawyers made public on Thursday.
The Securities and Exchange Commission had to review the letter which created a delay of roughly one week for the offering to start trading.
Ackman and his investment team met with nearly 100 of the biggest hedge funds and mutual funds to discuss Pershing Square USA. A decade ago he raised $2.9 billion for Pershing Square Holdings, which was listed in Amsterdam.
He counted on his popularity on X, where he has roughly 1.3 million followers and weighs in on topics of the day ranging from politics to higher education, to woo retail investors to support the fund.
The fund has said it will acquire and hold positions in 12 to 15 large capitalization, investment grade, free-cash-flow-generative undervalued companies in North America.
Ackman already has two unidentified new investments, he told people close to the fund and he expects to use X much more to share investment updates.
Since January, Pershing Square Holdings, which provides his firm permanent capital, has returned 6.4%.
Since its launch two decades ago, Ackman's hedge fund returned 16.5% a year. Had it existed in its current form, Pershing Square USA would have returned 19.4% during that time, he said in a video to attract investors to the deal. Those returns would have outperformed the S&P 500 stock market index by 9.3 percentage points per year.
Over the last 6-1/2 years it would have returned 31%, he said in the video.