Bill Ackman's SPAC sued, plaintiffs allege directors received huge compensation

According to reports in the media, Bill Ackman's SPAC, Pershing Square Tontine Holdings (NYSE: PSTH) is sued. Individuals fighting this matter to the court of the law claim that directors were awarded massive compensation for having the company's unique status revoked. However, in this backdrop, a spokesperson at Pershing Square rubbishes the allegations and calls them baseless.

As per claims, Pershing Square Holdings is not a company

Former Securities and Exchange Commission Commissioner Robert Jackson and law professor at Yale John Morley, the lawsuit's plaintiffs claim that Pershing Square Holdings is not a company in the first place. Instead, the duo alleges that it is indeed an investment firm, just like Ackman's hedge funds. The two added that the firm should follow the Investment Company Act of 1940.

The lawsuit alleges that SPAC's sponsors received $880 million by repurchasing warrants

According to the lawsuit, it is alleged that SPAC's sponsors received $880 million by repurchasing warrants. Claims are made that the warrants were purchased 13 times from what they originally cost.  Warrants allow investors to buy a share of stock for a particular price before a specific time. In this regard, the case filing said:

The spokesperson at Pershing Square reacts to the lawsuit

A spokesperson at Pershing Square Capital Management said:

Ackman's SPAC was in the news last month when it turned down a deal to purchase 10% of Universal Music Group. Concerns from the SEC were cited as the reason for the agreement not coming through. Had the agreement been inked, Ackman's SPAC would have had $1.5 billion in residual cash.

The SPAC had a good run in the 1Q. However, with regulatory pressure growing in the second quarter, the SPAC market has almost come to a stand-still and is witnessing about a 90% drop in issuance.