Billionaire investor Bill Ackman pitched an innovative approach to taking SpaceX (SPACE) public through a merger with Pershing Square SPARC Holdings.
Ackman’s plan would distribute special purpose acquisition rights (SPARs) to Tesla (TSLA) shareholders, giving them the opportunity to invest in a SpaceX IPO. Shareholders who prefer not to participate could sell their SPARs to other interested investors.
“This would reward loyal Tesla shareholders with the opportunity to invest in SpaceX (or with cash for their SPARs), while totally democratizing the IPO process,” Ackman wrote in his social media pitch to Elon Musk.
Key features of the deal structure
- No underwriting fees or dilutive securities
- No founder stock or shareholder warrants
- Pershing Square would waive its right to receive SPARC sponsor warrants
- SpaceX would go public with a 100% common stock capital structure
- Transaction costs limited to modest legal fees, which SPARC would cover
Pershing Square has committed to investing $4Bof capital at a fixed price per share, regardless of market conditions.
The numbers
Under Ackman’s proposal, approximately 0.5 SPARs would be issued for each share of Tesla, resulting in 1.723 billion SPARs outstanding (including 61.1 million SPARs already in circulation). Since each SPAR would be exercisable for two shares of SpaceX, the total would represent 3.446 billion SpaceX shares.
The capital raise could be substantial:
- At an exercise price of $11.03 per SPAR, SpaceX would raise $42B
- At an exercise price of $42 per SPAR, SpaceX would raise $148.7B
Timeline and future possibilities
Ackman suggested that due diligence and a definitive agreement could be completed within 45 days, with a potential announcement by mid-February. The structure also offers flexibility for primary versus secondary shares.
Beyond SpaceX, Ackman dangled an additional incentive: exercising SPAR holders would receive Pershing Square SPARC Holdings II SPARs, which could potentially be used to take Musk’s artificial intelligence company xAI public at a future date.
“It only seems appropriate that the most innovative and efficient rocket company in the world should go public in the most innovative, efficient, and fairest-to-Tesla-shareholders manner possible,” Ackman concluded. “To Mars and beyond!”